DEVELOPMENT OF ACCOUNTING
IN THE FIRST HALF OF
20
thCENTURY IN TURKEY
Orten, Remzi
Prof. Dr., Chair of Management Department, Gazi University
Address: Gazi Üniversitesi, İktisadi ve İdari Bilimler Fakültesi, Besevler Ankara, Turkey Tel: +90 312 221 21 10
DEVELOPMENT OF ACCOUNTING IN THE FIRST HALF OF 20th
CENTURY IN TURKEY
ABSTRACT
Trading was not an important instrument of Ottoman Empire, which is the predecessor of modern Turkey. It was a common way that trading was mostly done by non Muslim communities or foreign merchants. The philosophy of bir lokma bir hirka (one bite of food, one jacket) was not only influential on the lack of development in private sector but also did prevent the development of private sector accounting. Trade Law that came into force in 1807 was translated from Code de Commerce of France and had been in force for 76 years. Nevertheless, the existence of religious law in the Ottoman Empire constrained the practice of this law. The German academicians those who worked at Turkish Banks and industrial enterprises after taking refuge in Turkey as a result of World War I, had an influence on the accounting formation and practices of Turkey and affected the regulation of Turkish Trade and Tax Law to some extent. Contrary to this, it was French applications which impacted both Ottoman and Turkish Republic accounting system basically.
Keywords: Accounting, Development of Accounting, Trade Law, Private Sector Accounting, State Accounting, Double Entry Accounting System.
DÉVELOPPEMENT DE COMPTABILITÉ DANS LA PREMIÈRE MOITIÉ DU XXe SIÈCLE
RESUME
Le but de cette étude est d'examiner le processus d'adaptation de comptabilité en partie double dans l'Empire ottoman qui a eu un system comptable unique pendant des siècles et ainsi que la comptabilité de la jeune Turquie et de voir dans quelle mesure ce processus a été influencé par les applications françaises. La loi du commerce qui est entrée en vigueur en 1807 avait été traduite du Code de Commerce de la France et est resté en vigueur pendant 76 ans. Néanmoins, l'existence de la loi religieuse dans l'Empire ottoman a limitée l’application de cette loi. Lors de la première guerre mondiale, des académiciens allemands ont trouvé refuge en Turquie et ont travaillé dans l’organisation de la comptabilité des certaines banques et des industries du pays. Ils y ont eu une certaine influence sur la formation de la comptabilité et sur les pratiques comptables. Dans une certaine mesure, ils ont affecté le règlement de la loi du commerce turc et la législation fiscale. Contrairement à ceci, c'étaient fondamentalement des applications françaises qui avaient effectué les applications comptables de l’Empire et de la République
Mots clés: Comptabilité, développement de la comptabilité, Code de Commerce, la comptabilité dans le secteur privée, la comptabilité d’état, comptabilité en partie double.
1.
INTRODUCTION
Even as not complicated as today, accounting has been part of human life since the first beginning.
It is a well-known fact that there were accounting records in Ancient Greeks and Roman Empire in 3600 BC within context of accounting principles (Akdogan and Aydin, 1987:65).
Kuran, the book of Muslim religion, also indicates that the registration of debts and credits is a necessity of trade (Bakara Sura: Verse 282).
It is known that Genoese merchants of Italy in 1340 were the first group that used double entry accounting system. It was French merchants of 17th century who did inventory in every two years (Akdogan and Aydin, 1987: 65, Unalan, 1973:2).
According to the accounting historians, the first book concerning accounting was Luca Pacioli’s Summa de Arithmetica, Geometria, Proportioni et Proportionalita written in 1494 (DPT, 1968: 3-10).
Besides this, before 131 years from Pacioli’s book, Abdullah Ibni Muhammed, a Middle Eastern man, wrote a book in 1361 named Risale-i Felekkiye, concerning double entry accounting system and its applications in the Middle East geography. It is thought that accounting applications of Middle East had an impact on the practices in Italy.(Otar, 1985:9, Alparslan, 198:4-5).
Stevelinck, who was one of the most important persons in accounting history, once told the writer of this paper that double entry accounting system was used in the Ottoman Empire before Luca Pacioli’s book was written and these records were kept in Suleymaniye Library of Istanbul. Due to Stevelinck’s words, the writer of this paper brought a copy of the aforementioned work to Ankara and let it translated into Turkish. The translated text was examined by a professional commission composing 3 experts and the writer of this paper. Nevertheless, the translation was not done by a person who had a technical knowledge and due to this fact; it was hard to
determine that double entry accounting system was used in the Ottoman Empire before Luca Pacioli did it. (Orten,1986:2).
Accounting is kind of a system in which there is an ongoing knowledge flow (CNC (Conseil National de Comptabilite), Plan Comptable General, Imprimerie Nationale 3e Edition, Paris, 1983, p.VII).
To sum up, it can be noted that if a country’s economy, industry and private sector is developed, its accounting system is also developed. From this perspective, it is easy to understand the reasons of developments occurred in Europe during 17th and 18th century (Hendriksen, 1977:39).
Turkish accounting system can be analyzed by dividing it into three periods:
i. The period before Malazgirt War i.e. the entrance of Turks into the Anatolia Geography in 1071.
ii. The period between 1071 and 1839 that does not include Westernization.
iii. The period starting in 1839 after Tanzimat (Decree of Reforms), concerning the westernization period. (Guvemli, 1995/a: 13).
In this context, it can be said that contemporary accounting system has developed in Turkey since 1839.
Accounting in a country is in question for persons, enterprises, institutions and state. Indeed, in the rising period of Ottoman Empire that constitutes the base of modern Turkey, it is hard to find a trace of accounting for persons and enterprises. (Guvemli, 1998/b: 74). Furthermore, accounting in private enterprises was not advanced, either. The reason could be explained from the perspective of Islam religion, namely the philosophy that Islam is based on, i.e. bir lokma bir hirka (one bite of food, one jacket), and incapacity of trade and industry.
The characteristics of education and accounting education in the Ottoman Empire before Tanzimat can be summarized as below:
• In this period, the education took place in medrese (Muslim theological school) which was based on Islamic way of education and Islamic Law. In addition to this, these schools were teaching medical science and engineering.
• Military and diplomacy education took place in the official education institutions. Muhendishane-i Bahri Humayun (Military
Engineering for Navy) and Muhendishane-i Berri Humayun (Military Engineering for Land) can be listed as examples.
• Other branches of education excluding the above mentioned areas and including accounting education were done within context of craftsman-apprentice relation which was maintained in Arabic language. (Guvemli, 1998/b: 468).
• The first accounting education school in the Ottoman Empire was Bab-i Defterdari Mektebi (Guvemli, 1998/b: 473).
Until the declaration of Tanzimat in 1839, the Ottoman Empire had a tax regulation based on Islamic Law including zekat, asar, harac and cizye, namely not a system similar to today’s modern system. For this reason, tax system did not have an important effect on accounting. (Guvemli, 1998/b: 796799). However, after the declaration of Tanzimat in November 3 of 1839, the Ottoman Empire started to aim Westernization, in which European style of agricultural and industrial renovation was one of the main goals.
One of the other targets of Tanzimat was to encourage Muslim people of the Empire for trading. (Guvemli, 1999/c: 27).
For an intensive work on any issue, it is necessary to explain the previous periods. Therefore, this study is based on the principle which aims to give information about the situation in the 19th century and then to analyze the developments that took place in the first half of the 20th century.
In the first half of the 20th century, French applications basically influenced accounting applications of young Turkish Republic. It is clear that both German and American applications had an influence on Turkish accounting applications in certain times. But only French influence will be examined in this study. German and American influences will be examined in other two papers.
2.
THE SITUATION IN THE 19
thCENTURY
The developments in economics, trade law, tax law, accounting education institutions, staff and materials during the 19th century will be analyzed in subtitles of this chapter.
2.1. Developments in Economics
During the 19th century, both trading and industry started to change and develop (Marshall, 1961:40).
In this period, several institutions that affected accounting were established in Turkey.
In the Ottoman Empire, trading was generally done by non Muslim communities and foreigners due to several reasons. One of the main reasons was the existence of capitulations and the other one was the economic system which underestimated trading and export-import relations for centuries. Hence, it became a customary for the ones trading in the Ottoman Empire to record accounting books in their native languages. The state did no audit and got no tax from their profits. (Guvemli, 1999/c: 43).
It was not free for everyone to found an enterprise or invest in every area. In order to establish an enterprise or invest in any sector, state concession was obligatory. In this period, free economy did not develop, so there was a heavy bureaucracy for the entrepreneurs. For this reason, private sector investment did not develop. (Guvemli, 1999/c: 45-46).
The commission entitled Islah-i Sanayi (amelioration of industry), was established in 1863 in order to increase the number of investments. (Guvemli, 1999/c: 47).
The trade and industrial applications shaped according to the gedik (breach) system, which limited the number of personnel and the number of working branches, was just removed in 1913. (Guvemli, 1999/c: 52).
Both capitulations and Duyun-u Umumiye (General Administration of Debts) affected economical development and accounting applications negatively. (Guvemli, 1999/c: 53-54).
On the other hand, uses of bill in 1840, foundation of stock exchange in 1866 were among the new developments that affected accounting in a positive way. (Guvemli, 1999/c: 63-70).
2.2. Situation Concerning Trade Law
Turkish Trade Law was translated from French Code de Commerce which came into force in France in 1807, into Turkish in 1850. Code de Commerce foresighted to establish a balance sheet in every two years (Bowden, Karpovich, Usher, 1937:36). The newly translated law named Kanunname-i Ticaret was in force for 76 years until 1926. Nevertheless, the existence of regulations based on Islamic Law prevented the application of this law.
2.3. Situation Concerning Tax Law
The tax law taken from France entitled les quatre vieilles (four oldsters) was important for tax regulations of Ottoman Empire and young Turkish Republic in terms of its influences on tax thought. Among these tax laws, property tax and patent tax were based on wealth. The other two were la contribution mobiliere (tax of movable goods) and la contribution des portes et fenetres (tax for doors and windows).
The first two taxes, those which based on external evidences, influenced late Ottoman era to a great extent. The aforementioned property law was calculated not according to the ratio of renting price, it was being taken according to an estimated value. On the other hand, patent tax was kind of a duty taken through an estimated renting income which was collected according to an estimated value of merchants’ domiciles and places of employment. This tax started to be taken in the Ottoman Empire in early 20th century in the name Temettu (dividend tax).
The above-mentioned duties were not kind of contemporary taxes taken through income or profit. The fixing of these taxes did not necessitate development of accounting. However, in the French practice that influenced Ottoman Empire in particular after Tanzimat, accounting knowledge was obligatory to determine the tax ratios those taken through expenditure, i.e. chiffre d’affaires (sales turnover).
Certain duties of expenditure taxes those which influenced accounting applications are as below: (Guvemli, 2001/d: 128-130).
i. Consumption taxes taken in the process of production, ii. Taxes taken through the alcoholic drinks,
iii. Consumption taxes taken in the process of sale of food and similar goods.
The taxes mentioned in above lines those which were under French influence were basic tax laws been in force during late Ottoman era and early Turkish Republic period. All these taxes affected the development of accounting.
2.4 Situation of Institutions Relevant to Education
Several institutions for accounting education were established in this period:
• As examples for high school education, Mekteb-i Rüştiye (junior high school), Mekteb-i İdadiye (senior high school), Mekteb-i Sultani (a special group of senior high school), Mekteb-i Küttab-ı Askeri ( military high school), Aşiret Mekteb-i Hümayunu (royal high school), Evkaf Memurları Mektebi (pious foundations high school) can be given.
• As examples for university degree, Dârül Fünun-i Osmanî (school of bureaucracy and diplomacy), Dârül Muallimi (School of Education), Maliye Memurları Mektebi (School of Financial Officials), Mekteb-i Mülkiye (school of political science), Hamidiye Ticaret Mektebi (school of trade) can be given. (Guvemli, 1999/c:94–105).
The schools teaching accounting were using accounting books written in French those which were then translated into Turkish. (Guvemli, 1999/c: 428).
Hamidiye Ticaret Mektebi (school of trade), which was one of the most important schools that educate accounting, used the education program of French Ecole des Hautes Etudes Commerciales-HEC (High Education on Trade). In addition, Trade Law was Turkish version of French Code de Commerce. As a result of these two facts, the accounting education in this period was under influence of French thought. (Guvemli, 1999/c: 428).
2.5 Situation of Educational Staff and Teaching Materials Following the defeat in Battle of Waterloo in the direction of Napoleon, starting in 1920 France paid more attention to its weapons technology as a result of which it moved ahead in a short time. Due to this fact, the Ottoman Empire wanted to renovate its army by taking advantage of French institutions.
Cultural relations followed these commercial relations. In the half of 19th century, approximately 200 Turkish students were dispatched to France in order to continue their education. Moreover founding an Ottoman School in Paris was once planned. These young men, whom then turned to the Ottoman Empire, started to call themselves as Jon Turkler- Jeunes turcs (Young Turks) and became influential on Ottoman political life. Certainly, accounting education in this period was under French impact, too. (Guvemli, 1999/c:407). This caused the modern application of double entry accounting system in Turkey since the second half of 19th century. (Guvemli, 1999/c:407).
The accounting education under French influence that started in the first half of 19th century, continued until half of 20th century i.e. approximately 100 years.
One of the four books of accounting education used in this period was translated from French to Turkish, and the others were written by Turkish educators who were influenced from the French thought.
These books and their writers are listed below: Table 1: Information about the books (Guvemli, 1999/c:598, 620, 642, 664.)
Content of the book Publication Date Name of Autor
Muhtasar Usul-i Defteri (Translated from French)
(Procesus Comptable Résume –
Resumed Process of Accounting) 1882 Süleyman Arif
Fenn-i Defteri
(Enregistrement Comptable-Book
keeping) 1892 Mülayım-ı Evvel Ahmed Ziyaeddin
Muhasebe-i Ziraiye
(Comptabilité D’Agricole –
Agricultural Accounting) 1885 Ziraat Müfettişi Aram
Fenn-i Defterî Kayd-ı Muzaaf Usulü (La Comptabilité en Partie Double -
Double Entry Book keeping) 1895 Muhasebe Memuru Şefik
3. THE DEVELOPMENTS IN THE FIRST HALF OF 20TH CENTURY
In this part of our study, the period that was taken over, the developments relevant to accounting in 20th century, establishment of chambers of trade and industry, foundation of security fund, foundation of the commission for amelioration of finance, reformation of Trade Law and other relevant contemporary law reforms, the first movements to form the legal base of accounting system and the establishment of Tax Establishment Board under Ministry of Finance will be evaluated.
3.1Summary of the Period That Was Taken Over While reforming their accounting applications, each country faces both negative and positive results. In this part, these facts will be evaluated and the reasons of French influence on accounting applications will be explained where the German and American impacts will only be referred. The reason to only focus on French influence in this study is to prevent writing a long paper and to aim analyzing German and American effects on Turkish accounting applications in other two papers.
In the first half of the 20th century, it was French laws which basically influenced the development of accounting in Turkey (Hiçşaşmaz, 1970:60). The German applications had a partial and temporary affect on Turkish accounting system during this period (Hiçşaşmaz, 1970:61). In this paper I will only examine the period in which French applications were influential to a great extent.
The period that I will evaluate was under French influence to an important extent, but it would be appropriate to note that the German applications were also influential to some extent. But when we examine the characteristics of the development occurred in commercial accounting, it is concrete that French applications determined the color of that period. In this respect, as it was seen in Western countries and also in France, accounting was applied previously to cover the needs of commercial enterprises and afterwards the application zone was enhanced step by step due to which today’s system was set up. Regarding the theoretical and practical aspects, Turkish accounting system has advanced through passing two main phases.
The important affects of German accounting system, which mainly aims to legalize both the general and cost accounting systems, can be listed as below (DPT, “Muhasebe Usullerinin Islahı ve Yeknesaklaştırılması” (Giriş), İstanbul, Yayın no: 867.):
• The article referring the incorporated firms in Law 865, titled Turkish Trade Law, was translated from German Trade Law (1926).
• Sümerbank, which was established in 1933 and affected the accounting applications of both public and private sector, had an accounting organization prepared by the German professor Sachsenberg.
• It was Professor Neumark who had an impact on the preparations of tax reforms and financial regulations in 1950. The regulations related to tax reforms particularly enabled to convert accounting to a discipline.
• German Professor Hircsh had important contributions on Law 7128, titled Turkish Trade Law.
German and American effects on Turkish accounting applications will be evaluated in other two papers.
Following the hardships occurred after the World War II, Turkish economy started to be in more relations with Western economies. Nevertheless, this situation created new problems in Turkish economic and financial structure. In particular, the Law came into force in 1950 concerning income tax reforms, created a larger taxpayer community which had to deal with accounting issues.
The American influence on Turkish accounting system started after 1960 and continued afterwards (Örten,1986/b:471).
The developments that affected accounting applications of Turkey in both positive and negative ways in the first half of 20th century can be listed as below:
3.1.1 Positive Developments
• The desire for westernization started with Tanzimat as a result of which distinctive regulations came into force.
• With Islahat Fermani (Declaration of Reforms) of 1856, reforms for the renovation were done.
• Turkish Trade Law, which constituted the base of accounting applications, was translated from the French Trade Law and came into force in this period.
• Contemporary accounting courses those which were under influence of French originated resources, started to be thought at high schools and universities.
• A new curriculum was adopted in which double entry accounting system started to be thought. In addition, French style educated staff started to teach at schools.
• Even not as same as the current one, a stock exchange was established in Istanbul.
3.1.2 Negative Developments
• Economical development was not still enough for new industrial and trading enterprises. For this reason, accounting applications in private sector was not sufficient.
• Tax regulations were not enough for the development of accounting applications, yet.
• There was not any Turkish National Bank, yet.
• The negative effects of capitulations and Duyun-u Umumiye (General Administration of Debts) still existed.
• Accounting Profession Law wasn’t formed.
• Establishments that could be useful for accounting applications such as Sermaye Piyasasi Kurulu-SPK (Capital Board of Turkey) and Bankacilik Duzenleme ve Denetleme Kurulu-BDDK (Banking Regulation and Supervision Agency) were not founded,yet.
• There weren’t any study about uniform accounting system.
• There weren’t any national council such as Conseil National de la Comptabilité-CNC (National Accounting Council) of France, Financial Accounting Standards Board-FASB) of the USA and Accounting Standard Committee-ASC of Britain that determine accounting principles and shape accounting applications.
3.2 The Studies Made in the First Half of 20th Century and
Their Impacts on Accounting
The international capital flow and foreign direct investments made it necessary to form uniform financial standards. For this reason, in 1925, the investors tried to form international accounting and financial reporting concept. In this context, excluding the period during the World War II, they gathered in every five years (Türkiye Muhasebe Uzmanları
Derneği, 1975:38).
Following the economic crisis period in 1929 and 1930, accounting became to be on focus and the scope of financial reports of enterprises was extended (Freear, 1978:19).due to the negative outcome of the economic crises seen all across the world, the American Accounting Institute and New York Stock Exchange cooperated in order to oblige financial reporting (Zeff, 1972:217-227).
Economic development and organization have been important in terms of advancement of accounting. In this context, during the 19th and early 20th century, the points listed below were influential on the development of accounting thought of the United States (Hendriksen, 1977: Chapter 2-3):
• Institutionalization,
• The establishment of Stock Exchange,
• The entry of foreign capital into American economy,
• The direct investments of Americans in foreign countries,
• The necessity to organize consolidated financial tables. It is a well know fact that crisis prevent economic development and development of accounting. For instance, we can note that the financial information started to address practitioners and potential investors instead of creditors and directors after the economic crises (Hendriksen, 1977:54).
Following the economic development, the need to improve different financial table types did occur. For instance, the main financial table in which accounting was used, was balance sheet. Until the 1930’s this table used as an evaluation table, but afterwards the income tables started to be applied (Hendriksen, 1977:54-56).
Lack of sufficient capital is one of the most important factors that prevent the development of economy, accounting and enterprises. For this reason, the state owned economic enterprises, which were established in order to be a model for the development of Turkish economy and private enterprises, affected the development of accounting and its contemporary applications (Walstedt, 1980; 60-61).
For a long time, the Turkish economy was based on the activities initiated by these state owned economic enterprises (Aysan-Özmen, 1981:11). Because, the private sector enterprises, which were on the phase of development, were mostly family establishments due to which accounting applications were not possible (Birch, 1984; 36).
The studies made in the first half of 20th century in Turkey and their effects can be summarized as below:
1. Holding Turkish Economy Congresses, 2. Establishment of trade and industry chambers,
3. Foundation of security fund,
4. Foundation of a commission for amelioration of finance, 5. Formation of duty immunities and Law of Industry Incitement, 6. Formation of modern laws such as, income tax, institutional tax
and law of tax procedure,
7. Formation of Modern Code of Civil Law.
8. The studies to form a legal base for the accounting and audit profession (1932),
9. Establishment of Tax Establishment Board under Ministry of Finance (1945).
The above subjects will be examined in below topics: 3.2.1 Turkish Economy Congresses
As it is a well-known fact that the economic situation in a country is one of the main factors for the development of an accounting system. The economic development passes through the quality of enterprises. In this context, the Economy Congresses, held in 1923 and 1948, will be evaluated due to their importance for the development of economy in Turkey. The decisions taken in the first congress held in 1923 are important to a great extent because these were national decisions which could be applied all across the country.
a) Economy Congress (1923)
Milli Turk Ticaret Birligi(Turkish National Union of Trade) was the reporter of this congress held in February 15 of 1923. Nationalism constituted the character of this congress in which Ataturk did the opening speech. In his speech, Ataturk stated that Ottoman Empire did not pay attention on economics and did not get the view of public opinion for the decisions relevant to economics. He added that economic independence and national sovereignty was related to each other to a great extent and economics was directly related to the future of whole nation. (Guvemli, 2001/d: 28-33).
This congress was important because of several reasons and among these, the time of the congress, namely jus after the independence war; the aim of the congress, i.e. Westernization can be listed as the facts.
The economical environment in the period of the congress can be summarized as below:
• There wasn’t any Central Bank that could mint money,
• There wasn’t any bank that could collect deposit and give commercial credits in long term,
• There wasn’t any investment bank that could give long-term credits to industry,
• There wasn’t any bank that could utilize small amount possessions of consumers or give residence credits,
• Capitulations and Duyun-u Umumiye (General Administration of Debts) affected economics negatively,
• Private sector enterprises and industry all belonged to non Muslim communities,
• Transportation system was not advanced,
• The number of education institutions concerning economics, trade and accounting were very limited.
It is hard to explain all the details of this congress in this paper. Among the decisions of the congress, some of them were very important, namely establishment of two banks in order to give credits to merchants and industrialists, foundation of state controlled enterprises, enhancement of trade and industry chambers all across the country, facilitation of establishment of incorporated companies, construction of harbors, formation of cabotage contrary to capitulations, establishment of Istanbul Ticaret Mektebi Âlisi (School of Trade) which was desired as the following institution of Hamidiye Ticaret Mektebi (Hamidiye School of Trade) and which constituted the base of Istanbul İktisadi Ticari İlimler Akademisi (Academy of Economy and Trade) and Marmara University, formation of stock exchange, giving duty immunity for the imported goods that are used in investment, to take measures to prevent the negative impacts of foreign goods can be listed as the examples.
The decisions made in this congress were based on the aim of economic development and modernization. As a result of this, the need for developing enterprises and accounting became on the agenda.
The decisions of this congress those relevant to economic development and its effects on accounting can be summarized as the following: Establishment of deposit bank contributed to the transformation of insignificant savings to investment which impacted economy in a positive way.
The establishment of Investment Bank facilitated the increase of investment by providing long term credits, thus contributed to the economical development.
The state owned economic enterprises were kind of a guide for the industrial establishments in terms of investments, trading and industry.
The abolishment of capitulations and Duyun-u Umumiye (Council of the Public Debt) encouraged the Muslim Turkish population for commercial activities due to which national economy and industry started to improve.
It was seen that there was a need for accounting; hence the studies on development of accounting were initiated.
On the other hand, modernization in both public life and private life lessened the mysticism due to which scientific approach became influential on many aspects of life, namely on the development of industry, accounting applications and education.
b) Economy Congress (1948)
This congress was held in Istanbul on November 22-27 of 1948. The main topics of this congress were as below:
• State control and state interference
• Foreign trade regime
• Tax reform.
Contrary to the decisions taken in the first Economy Congress, the main idea of this congress was to change the role of state in terms of its position in economics that is to say to enable more liberal economy was the main target of this congress.
Nevertheless the decisions relevant to the foreign trade regime could not be put into practice those which came into force after 1980. One of the main results related to accounting of this congress was the Tax Reform formed in 1949. The regulations came into force in 1949, namely the Institutional Tax, Income Tax and Tax Procedure Law, were discussed in this congress.
Furthermore, accounting system, accounting profession and tax reform were among the discussed topics of the congress.
Supporting of private sector instead of state owned enterprises, formation of tax reform which aims to get tax through profit, reducing the limits on foreign trade, improvement of accounting record system and profession were the main results of this congress regarding our topic.
3.2.2 Establishment of Trade and Industry Chambers
Establishment of trade and industry chambers is important in terms of a national economy. A particular regulation about the establishment of trade and industry chambers was formed in 1911. (Guvemli, 2001/d: 63).
Establishment of trade and industry chambers contributed to the development of trade and industry to a great extent. Following this, the need for a developed accounting system emerged.
3.2.3 Establishment of Emniyet Sandigi (Security Fund) Security Fund was established by Mithat Pasa in 1868 for the purpose of colleting small amount possessions of the society and enabling those credits. The main function of this fund was to collect the savings of ordinary people and to give them as domicile funds. This fund was firstly established in Istanbul and then became part of Ziraat Bankasi (Agriculture Bank). Finally it was transferred to Ankara in the name of Emniyet Sandigi. (Guvemli, 2001/d: 70).
Collecting insignificant savings and transforming them into credits contributed to the development of trade and accounting as well.
3.2.4 Formation of the Commission for Amelioration of Finance
This commission was established in 1910. The main functions of the commission were as below: (Guvemli, 2001/d: 76-77).
• To determine tax ratios, distribution of financial load and fixing the measures for collection of taxes,
• To propose new methods for the role of finance inspectors,
• To propose new methods for the amelioration of budget,
The measurements for the improvement of finance caused the increasing of taxes taken through the profits as a result of which accounting education, applications and audit became modern and developed.
3.2.5 Formation of Duty Immunities and Teşvik-i Sanayi Kanunu (Law of Industry Incitement)
Law of Industry Incitement was formed twice in the early 20th century, namely the former in Ottoman Era in 1913 and the latter in Turkish Republic period in 1927. The aims of these laws were to exempt the industry from several taxes and by this way to contribute to the development of national industry. (Guvemli, 2001/d: 84).
The promotion and development of industry increased the necessity for accounting. And this necessity enabled the development of accounting education, applications and audit. 3.2.6 Formation of Income Tax, Institutional Tax and Law of Tax Procedure
It is a well-known fact that taxes taken through the revenues is closely related to the accounting applications which necessitate an advanced accounting system in order to collect taxes according to the contemporary system. There were two important tax laws in the first 25 years of the Turkish Republic (1923-1950): The first one was tax of process, expenditure and profit, came into law in 1926-1927. The second reform was the formation of institutional tax, income tax and law of tax procedure in 1949. All these tax reforms were inspired from the European applications of tax regulations.
It can be said that these tax reforms deeply affected Turkish accounting applications, education and audit and were beneficial in terms of development of accounting. (Guvemli 2001/d: 125-126)
3.2.7 Reformation of Trade Law and Other Cotemporary Laws
Even though Trade Law, inspired from French Code de Commerce, was in force for 76 years, due to the co-existence of religious law, it was not efficient in many respects. Therefore, Turkish Trade Law was once again reformed as other legal regulations of young Turkish Republic (Guvemli, 2001/d: 148).
Furthermore, economic developments, establishment of trade and industry chambers, foundation of trade and investment banks and the formation of new tax laws, all necessitated a new Trade Law.
According to the writer of this paper, one of the most important absences of the Trade Law translated from French Trade Law in 1926 and reformed in 1957, was not having any sanction to be applied as tax laws whereas accounting books and records could be just used as a concrete for the commercial disputes.
3.2.8 8. The Studies to Form a Legal Base for the Accounting and Audit Profession (1932)
In 1932, even though there was a great effort to form the first professional law, it unfortunately had to stay in the archives of Ministry of Finance for a long time. With the Law on Advocacy legislated in 1938, a draft was prepared by the government; nevertheless it was rejected by a majority of the parliament composing of lawyers. Because the draft included an article which enabled the members of accounting profession to represent their clients before courts (Aysan, 1997:7).
3.2.9 Establishment of Tax Establishment Board under Ministry of Finance (1945).
In 1945, Ministry of Finance constituted an expert group on tax issues and examination of accounting records, which caused a more beneficial accounting education, application and audit environment.
3.3. Accounting Text Books in the First Half of 20th Century The accounting text books that were used in the first half of 20th century can be evaluated by dividing into three periods: (Guvemli, 2001/d: 195).
• The period between 1910 and 1928,
• The period between 1928 and 1940,
• The period between 1940 and 1950
The first period had started in 1910 with the fall of Sultan Adulhamit of Ottoman Empire and lasted in 1928, with the application of Latin alphabet. The use of Latin alphabet affected accounting applications, in particular the use of double entry system in both public and private sectors, to a great
extent. However, education of trade and accounting was still not widespread in all across the country.
After 1940, accounting education started to take place in Izmir Yüksek Ekonomi ve Ticaret Okulu (School of Economics and Trade) in addition to the schools in Istanbul. In parallel, the use of accounting text books increased in numbers.
3.3.1 The period between 1910 and 1928
Accounting historian Prof. Dr.Oktay Guvemli gives five examples of accounting text books, used in this period as below: (Guvemli, 2001/d:196).
Table 2: Text books used in the period between 1910 and 1928.
Name of the Book
Publication
Date
Name of
Author
Usul-i Muhasebe-i Maliye
(Comptabilité Générale – Financial
Accounting)
1914 Serkiz
Nihad
Defter-i Kebirli Yevmiye Yahut Amerikan
Usulü
(Comptabilité en Style Américain -
American Style Accounting - Journal Avec
Grand Livre – Journal With Ledger)
1914 Serkiz
Nihad
Muhasebe-I Tüccariye Mebadisi
(Comptabilité Commerciale –
Commercial Accounting)
1920 Serkiz
Nihad
Ameli Usûl-i Muhasebe-i Ziraiye ve
Çiftlik Muhasebesi
(Comptabilité D’Agricole – Agricultural
Accounting)
1921
İ
brahim
Faz
ı
l
Sigorta Muhasebesi - Harik, Nakliyat,
Hayat
(Comptabilité D’Assurance – Insurance
Accounting)
1926 Serkiz
Nihad
As it is seen in the table, four examples of the text books were written by Serkiz Nihad which were inspired fro the French text books. Serkiz Nihad graduated from Istanbul Ticaret Mektebi Ali (School of Trade) and Paris School of Trade. Receiving his Ph.D. from France ad Italy, continuing Istanbul Ticaret Mektebi Ali, which was under French influence,were among the reasons why he was inspired from French text books while writing his books. (Guvemli, 2001/d: 366)
Even though, Ibrahim Fazil, the writer of Ameli Usûl-i Muhasebe-i Ziraiye ve Çiftlik Muhasebesi, used some examples of German agricultural applications in his book; the terminology that he used in the books was mostly similar to the French applications. So, it can be said that Ibrahim Fazil was very much inspired from the French practices.
3.3.2 The period between 1928 and 1940
Kirkor Kömürcüyan’s İhtisas Muhasebeleri (Accounting of Specialization) and Serkiz Nihad’s Devlet Muhasebesi Usulü (Procedure of State Accounting) can be given as the examples text books for this period. Kirkor Kömürcüyan’s 228 pages of book was published in 1931, which was written for the students of Istanbul School of Trade including the issues of company, banking, insurance and cost accounting systems. Kirkor Kömürcüyan and Serkiz Nihad were both Armenian originated Turkish citizens. Kirkor Kömürcüyan who knew French and German, wrote the French translations of the names in his book which was written in Turkish and entitled “Banking Accounting”. Therefore, it can be easily said that Kömürcüyan was also under French influence.
3.3.3 The period between 1940 and 1950
We see that in this period, the number of accounting text books increased to a great extent. In order to state this increase, Prof. Dr. Cevat Yücesoy’s Sirketler Muhasebesi (Company Accounting), Prof. Dr. Osman Fikret Arkun’s Muhasebe Teorisi ve Pratigi (Accounting Theory and Practice), Rasim Saydar’s Envanter ve Bilanço (Inventory and Balance Sheet) and Prof. Dr. Ali Haydar Eriskin’s Bilanço Tetkikleri (Applications of Balance Sheet) can be given as examples. (Guvemli, 2001/d:.314).
Among these writers, Prof. Dr. Cevat Yücesoy graduated from Lausanne School of Economics and Trade and School of Political Science. He received his degrees in French language and translated many accounting books from French to Turkish.
Thus, it can be easily said that he was influenced by French system.
Rasim Saydar, who was a financial account expert, taught courses at Istanbul School of Economics and Trade.
Ali Haydar Eriskin, was an accounting professor at Izmir School of Economics and Trade.
It is hard to differ for both Rasim Saydar’s and Ali Haydar Erskin’s books whether French influence or German and American influences were dominant. But we know that these authors had their education in France in which period the Turkish Trade Law was translated from French Trade Law. For this reason it can be estimated that these two writers were probably under French influence.
3.4 Higher Education Institutions and Accounting Education
Between the years 1923 and 1950, Faculty of Political Science, which was transferred from Istanbul to Ankara and became part of Ankara University in 1936-1937, was among the institutions educating accounting.
During this period, it was Ulum-ı Aliye-i Ticariye Mektebi of Istanbul which intensively gave education on accounting. The name of this school than became Yüksek İktisat ve Ticaret Mektebi in 1936 and in 1959-1960 it was named as İstanbul İktisadi ve idari İlimler Akademisi (Academy of Economic and Administrative Sciences).
Meanwhile, Faculty of Economics which was under Faculty of Law in Istanbul University became an independent faculty in 1936 which gave accounting education.
The last established institution on accounting education during 1923 and 1950 was İzmir Yüksek Ekonomi ve Ticaret Okulu (School of Advanced Economy and Trade), which was established in 1945-1946.
In 1950, there were four institutions educating accounting:
• İstanbul Yüksek İktisat ve Ticaret Okulu (School of Advanced Economic and Administrative Sciences),
• Istanbul University Faculty of Economics,
• İzmir Yüksek Ekonomi ve Ticaret Okulu (School of Advanced Economy and Trade),
The number of man and woman graduated from these schools are listed below:
Table 3: Accounting Education Statistics during 1923-1950 Semester Year Number of
Schools Pupils Graduate number Educators
M W T M W T M W T 1923-1924 1 - - 142 - - - - - - 1927-1928 1 496 55 551 77 - 77 65 - 65 1930-1931 1 353 40 393 50 3 53 95 - 95 1935-1936 1 916 79 995 89 12 101 45 - 45 1940-1941 1 1.680 181 1.861 219 38 257 68 - 68 1945-1946 2 2.511 213 2.724 306 18 324 122 1 123 1950-1951 2 3.152 319 3.471 411 31 442 128 5 133
(Source: Unpublished Master Thesis of Ahmet Emirli, initiated by Assoc. Prof. Dr. Remzi ORTEN, “An Evaluation of Accounting Applications in the Republic Period of Turkey ” Ankara, 1987.)
During 1923 and 1950, accounting education was mostly done in advanced economy and trade schools. This can be seen both in number of students and number of branches. In addition, accounting took a great part in the course program of these institutions.
On the other hand, Ankara University Faculty of Political Science was one of the important institutions that the graduate students mostly work at bureaucracy and other governmental bodies. Due to its establishment in 1936, Faculty of Economics started to be effective after 1950.
Between the years 1950 and 1960, several new institutions were established. In 1958, School of Economy and Trade was established in Eskisehir, too. In 1959, with the Law 7334, the schools in Istanbul, Izmir and Eskisehir were named as Iktisadi ve Ticari Ilimler Akademisi (Academy of Economic and Administrative Sciences).
Following this legal regulation, accounting education significantly became widespread in Anatolia. For this reason,
similar institutions were established in Bursa, Adana and Trabzon. Furthermore, couples of advanced schools that give accounting education were established, too.
4.
CONCLUSION
While studying on the development of Turkish Accounting History of the first half of 20th century, the fact that the Ottoman Empire constitutes the base of Turkish Republic should be kept in mind. For this reason, the Ottoman Empire’s and Turkish Republic’s accounting system should be examined in parallel.
The Ottoman Empire was a state that lived for 624 years and ruled a great zone. However, the main philosophy of the empire was not based on the importance of trade and industry due to which the private sector accounting was not developed.
On the contrary, the state accounting system was very much developed. But this accounting system was mostly based on craftsman-apprentice relation. Moreover, use o Arabic alphabet, which was based on writing from right to left, made it difficult to use contemporary double entry system in accounting. With Tanzimat and Islahat, Westernization came on the agenda of the Empire. In this period, Westernization was mostly perceived as the adoption of French system in many respects.
Double entry accounting system started to be used efficiently after the change of alphabet from Arabic to Latin.
The factors that we analyze 19th century as a period under French influence are listed below:
• The translation of Turkish Trade Law, which constituted the base of accounting applications, from the French Trade Law,
• The French influence on the taxes used in this period,
• Hamidiye School of Trade which is very important in terms of trade, industry and accounting education adopted its course program from French School of Trade,
• French military renovation after its defeat in Waterloo in the direction of Napoleon in 1920, and Ottoman Empire’s desire to
renovate its army by taking advantage of French institutions. Improved cultural relations by dispatching 200 Turkish students to France,
• These students’ debut for teaching at Turkish schools after returning from France to Turkey,
• The reality that the text books used at schools were translated from French or written by Turkish scholars who were under French influence.
This portrait shows us that the accounting applications in the 19th century were under French influence.
Once again, the accounting applications in the 20th century were under French influence, too.
Even though there were temporary German influences, namely adoption of Incorporated Corporations Chapter from German legal system in the amendment process pursued in 1926 to the Turkish Trade Law formed in 1850, the refuge of German Academicians to Turkey after World War I, formation of accounting department of Turkish Maadin Bank and Sumerbank by German Professor Sachsenberg, German Professor Hirsch’s contribution to Trade Law and German Professor Numark’s contribution to the Tax Law, according to our view, Turkish accounting system in the first half of 20th century was basically under the French influence.
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