Tally sticks have been around for many thousands of years. They are a form of record-keeping made by carving notches on lengths of wood or bone. Such items have been found dating back to the early Paeleolithic period. In the Middle Ages great use was made of the tally stick to keep records of stocks, supplies, and to deal with monetary matters. They were particularly important at the Exchequer when people came to render payment. Reference is made to them in detail In a 12-century instructional book titled Dialogus de Scaccario - In English the Course of the Exchequer. The book explains to an apprentice how the exchequer is run. Tally sticks at this period were generally made from Hazel wood and were originally stored in leather pouches or canvas bags. The Exchequer books says that
"the length of lawful tally is from the tip of the index finger to the tip of the outstretched thumb. At that distance it has a small hole bored in it. The hole was used for passing through a leather thong in order to string tallies of the same subject together. "A thousand pounds is shows by a cut at the top of the tally wide enough to hold the thickness of the palm of the hand, a hundred that of the thumb, twenty pounds that of the little finger, a pound that of a swelling barley corn, one shilling smaller, but enough for the two cuts to make a small notch. A penny is indicated by a single cut without removing any of the wood. On the edge of the tally on which a thousand is cut, you may put no other number save the half of a thousand, which is done by halving the cut in like manner and putting it lower. The same rule holds for a hundred, if there is no thousand, and likewise for a score and for 20 shillings which made a pound. But if several thousands, hundreds or scores of pounds are to be cut, the same rule must be observed, that the largest number is to be cut on the more open edge of the tally, that is to say, that which is directly before you when the notch is made, the smaller on the other. But the larger number is always on the first of the tally and the smaller on the reverse. There is no single cut signifying a mark of silver: it is shown in shillings and pence. But you should cut a mark of gold as you do a pound, in the middle of the tally. A gold penny that is a besant, is not cut like a silver one; but the notches are cut in the middle of the tally with the knife perpendicular, and not sloping as with a silver one, thus the position of the cut on the tally and the difference in the cutting settles what is gold and what is silver."
This takes a bit of thinking through, but it makes sense. The notches on the wood were a record of how much had been paid into the Exchequer. Once the notches Had he been made on the tally stick, The shaft was then split lengthways into two pieces of unequal length, but both pieces had identical notches. The longer piece was known as the stock and was given to the person paying into the Exchequer as a record of how much he had paid. The Exchequer officials retained the shorter piece, which was known as the foil. When it came time to audit the accounts, the two pieces were fitted together to see if they would "tally". It is also the origin of our word 'stock exchange'.
Tally sticks were used extensively in the merchant community. People might speak different languages, they might be illiterate, but everyone could understand a tally stick. Their use continued in the Exchequer until 1826. In fact tally sticks were responsible for the destruction of the old Houses of Parliament in 1834. Old, unwanted tally stick were being burned on a purpose-made fire that got out of control and burned down the entire building. In the ensuing conflagration the majority of the ancient tally records were lost. However, a few survived, as witnessed by the photo from the National archives.