Review and extension of Bhattacharyya's Modern Accounting Concepts in Kautilya's Arthasastra

This is a discussion of the theoretical aspects of accounting as they emerged in India during the Maurya period (c.321 BC to c.184 BC) in Kautilya's Arthasastra (c.300 BC) - the very first known treatise to deal with accounting aspects in the history of our discipline. Pertinent evidence can be found in an article by Choudhury (1982) and in Bhattacharyya's (1988) book, Modern Accounting Concepts in Kautilya's Arthasastra. This book, hardly known in Western accounting circles, claims that Kautilya's ancient treatise anticipated a series of 'modern' accounting concepts. These claims are here examined on the basis of the two standard translations of the Arthasastra, the original one by Shamasastry ([1915] 1967) and an extended one by Kangle (1963). Apart from some background material, the focus of this paper is on three aspects: (1) Kautilya's various types of income (including aspects of accounting for price changes, the distinction between real and fictitious holding gains, etc.) and their possible relation to modern concepts; (2) his classification of expenditures or costs (including possibly fixed vs variable costs); and (3) his notions of capital. These aspects indicate a surprisingly long-standing need for and possible use of relatively sophisticated accounting concepts. Thus Choudhury and, particularly, Battacharyya must be praised for drawing the attention of Western accountants to different aspects of an important ancient treatise. Yet Bhattacharyya (1988) deserves to be critically investigated and interpreted, not only from a Western point of view but also from the perspective of modern price-level accounting.