STUDIES ‘IN THE HISTORY OF ACCOUNTING Studies in the History of Accounting Edited on behalf of The Association of University Teachers of Accounting and the American Accounting Association by A. C. LITTLETON, Ph.D. Emeritus Professor of Accounting, University of Illinois and B. S. YAMEY, B.Com. Reader in Economics, London School of Economics and Political Science, University of London 1956 RICHARD D. IRWIN, INC. HOMEWOOD, ILLINOIS Published in the United States of America (©) 1956 by Richard D. Irwin, Inc. Published in Great Britain by Sweet & Maxwell Ltd. of 2 & 3 Chancery Lane London — Law Publishers Printed in Great Britain by The Eastern Press Ltd. of London and Reading Preface MODERN accountancy differs from most branches of professional activity in that one of its major techniques—double-entry book- keeping—goes back as far as the fourteenth, perhaps even the thirteenth, century. This technique has proved to be serviceable and effective in the changing circumstances and with the changing business requirements of over five centuries. It has also had an intellectual interest sufficient to attract the active attention down the centuries of distinguished mathematicians and scientists such as Luca Pacioli, Simon Stevin, Charles Hutton and Augustus de Morgan. It is one of the objectives of this book to iJumine some aspects of the long history of double entry. Its early origins as revealed in surviving accounting records; some of its earliest expositors, their eminence and achievements in wider fields, and their treatises on accounting; the evolution of particular practices associated with double entry; the methods of teaching double entry and the emergence of theories of accounting; the spread of the practice—these are among the subjects considered in this collection of studies. In many instances the authors of the essays in question break new ground, provide new interpretations, or conveniently bring together and analyse material otherwise available only in scattered places. But the historyof accounting, of course, is more than the history of double entry. The need to keep records of financial and other |/ business transactions is an ancient one, and it is perhaps no accident that the earliest surviving examples of writing are in the records of temple incomes kept by priests in Sumeria. We have therefore included some essays on accounting practices and records before the appearance of double entry. Thus the first essay is on accounting in classical antiquity; besides its thorough and comprehensive review and interpretation of surviving records, the essay also includes discussions on several related topics, notably on numeral systems. We havealso included, for example, a short essay on the oldest known business records of the Middle Ages—three scraps of paper, dating from 1157, inserted in the records of a Genoese notary. This contribution illus- trates the skill of the historian in making use of fragmentary material; it also serves to show, as do other essays also, that simple accounting records have often adequately met the needs of their owners. / Double entry did not immediately displace all other systems—or practices which cannot be dignified with the name of system. We V e V1 Preface have included a number of essays which deal with post-Paciolian accounting records untouched by the teachings of Pacioli and his numerous successors. For example, there is an essay on a bookseller in seventeenth-century London who kept track of his varied activities by meansof simple records, and others on traders in Colonial America and pioneering merchants in Australia whose account-books reveal much of early trading conditions and practices, though displaying a low level of technical accounting attainment. The fascination of old accounts stems from at least two sources. Those familiar with present-day accounting practices may be interested to find similarities and differences in earlier accounting, and to see the germs of modern techniques and procedures in centuries-old records. The other main source of interest is the contents of old account- books as distinct from the accounting technique displayed in them. Historians working in a variety of branches of history have found useful or entertaining material in account-books which often havelittle to offer the historian interested in accounting techniques as such. Entries in the account-books of patrons showing payments to artists have sometimes helped art historians to settle difficult problems of attribution and of dating works of art. Accounting records of business _. firms have similarly helped to shed light on a wide range of subjects _ of interest to economic and social historians; thus they have provided useful information, for example, on the profitability of the eighteenth- century slave trade, or added lively detail to established generalisations on matters such as the direction of international trade or the degree of specialisation in trading activities in earlier centuries. In our selection we have included a variety of essays, some likely to appeal more especially to readers who are interested in the develop- ment of accounting technique, and others also likely to attract those with other or less-specialised interests. And the dichotomy between the two sorts of interest is not a sharp one; the economichistorian, for example, may well wish to speculate on the influence of changes in accounting techniques on the organisation of business firms or on business practices generally. The majority of the essays, we believe, are likely to be useful to the historians of accounting (in the narrow sense) without having their interest confined to this specialised field. The historian of accounting can have recourse to two main kinds of material: surviving accounting records, and the textbooks and treatises on accounting. The precise relation between practice and pedagogic exposition is debatable; but it is clear that both sources are of use and of interest to the historian, and we have therefore included studies based on both kinds of material. We have chosen the year 1900 as our rough terminal date, and Preface Vii there are no essays on “‘ contemporary history.”” Two of the contribu- tions relating to the nineteenth century, however, are directly con- cerned with issues that are still prominent today—the definition and periodic calculation of the profits of an enterprise, the contents of accounting statements to be furnished to absentee shareholders, and the role of the State in regulating company accounting practices. But our terminal date does not permit the inclusion of material, for example, on mechanised accounting, which is already bringing about major changes in the organisation of accounting procedures and in the processing of raw data to make them useful for administrative purposes. But even here, as in other developments also, there is some historical continuity; the abortive revolt against double entry some 150 years ago, described in one of the essays, wasat least partly inspired by the wish to minimise clerical work in the keeping of accounts, to accelerate the production of required data, and to reduce the possibility of humanerror. The studies in this book span a period of roughly two-and-a-half thousand years, from about 600 B.c. to the end of the Victorian era. It is almost superfluous to say that the collection does not pretend to present a comprehensive record of the development of accounting practices and techniques during this long period. Some of the inevitable gaps indicaté areas or periods in the history of accounting which, so far as we know, have not attracted attention; the examina- tion of double-entry records of the seventeenth and eighteenth centuries is a case in point. We would like to think that the publica- tion of this collection of studies will help to arouse more active interest in the history of accounting, and that parts of the story, at present inadequately understood, will be elucidated. We have also deliberately excluded a number of aspects of the development of accounting so that the remaining field could be more satisfactorily represented; for this reason our selection does not attempt to cover the history of cost accounting, auditing, and government accounting. We are very grateful to our contributors for making our task as editors both easy and pleasant. Requests for contributions—well over half the studies in this book have not been published before— did not meet with a single refusal, and our contributors both agreed to work, and in fact did work, within a fairly tight time-schedule. We are also muchindebted to the following for their generous permission to reprint published material: American Institute Publishing Co., Inc., Accountants Publishing Company Limited (of Australia), and the Editors of Accounting Research, The Bulletin of the Business Histo- rical Society, The Economic History Review, The Three Banks Review, and The Westminster Bank Review. The inclusion of eight ” Vili Preface pages of photographic reproductions has been made possible by the courteous co-operation of the following: British Library of Political and Economic Science; Delegates of the Clarendon Press, Oxford; Professor Raymond de Roover; Electa Editrice of Milan and Florence; Institute of Chartered Accountants; Library of the Harvard Business School; Mercers’ Company; Public Records Office; and Society for the Promotion of Hellenic Studies. We also wish to thank our publishers, colleagues and contributors for much helpful advice and assistance. This is the third in a series of volumes of collected studies on accounting subjects, the first two volumes being Studies in Accounting, edited by Professor W. T. Baxter, and Studies in Costing, edited by Professor David Solomons. However, the initiation of the present work differs from that of its predecessors in an important respect. In its sponsorship of this third volume the Association of University Teachers of Accounting has been joined by the American Accounting Association, a form of Anglo-American co-operation whichit is hoped will continue in the future.