Hostname: page-component-8448b6f56d-wq2xx Total loading time: 0 Render date: 2024-04-24T02:45:27.170Z Has data issue: false hasContentIssue false
  • English
  • Français

Balancing the Books: Convergence and Diversity of Accounting in Massachusetts, 1875–1895

Published online by Cambridge University Press:  21 August 2020

Caitlin Rosenthal
Caitlin Rosenthal*
Affiliation:
Assistant Professor, University of California, Berkeley – History, 3229 Dwinelle Hall, Berkeley, California 94720. E-mail: crosenthal@berkeley.edu.
Get access Rights & Permissions [Opens in a new window]

Abstract

The late nineteenth century is often described as an era of innovation in managerial practice, including accounting. However, despite rich case studies of individual firms, we have little quantitative knowledge of average practices. This paper uses errors and omissions in balance statements to estimate the prevalence of double-entry bookkeeping and depreciation at Massachusetts corporations between 1875–1895. In 1875, 62 percent of firms balanced their returns, but by 1895 this number exceeded 96 percent. The proportion considering depreciation increased from 18 to 24 percent over the period. Firms using these techniques survived longer on average.

Type
Article
Information
The Journal of Economic History , Volume 80 , Issue 3 , September 2020 , pp. 782 - 812
Copyright
© The Economic History Association 2020

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

I would like to thank participants in the Berkeley Economic History Workshop, the Harvard University Economic History Tea, and the Yale Economic History Workshop. Thanks also to Eric Hilt, Claudia Goldin, Stan Engerman, John Wallis, Naomi Lamoreaux, Marty Olney, Bob Margo, Rick Hornbeck, Tom Nicholas, Dana Rotz, Simo Goshev, Elena Schneider, Carolina Reid, Karen Tani, Lisa Charisma Acey, Elena Conis, Lisa Trever, and Karen Trapenberg Frick for advice during the revision process. Claire Wrigley, Cameron Black, Wen Rui Liau, Nicole Youssef, Joseph Hernandez, and Aria Beizai provided excellent research assistance. Insightful reports from two anonymous reviewers and Editor William Collins dramatically improved the paper.

References

REFERENCES

A’Hearn, Bryan, Baten, Jörg, and Crayen, Dorothee. “Quantifying Quantitative Literacy: Age Heaping and the History of Human Capital.” Journal of Economic History 69, no. 3 (2009): 783–808.CrossRefGoogle Scholar
Alger, Israel. Key to Book-Keeping, or a Practical Illustration of the Fundamental Principles of Mercantile Science. Boston: True and Greene, 1823.Google Scholar
American Institute of Accountants. Accountants’ Index: A Bibliography of Accounting Literature to December, 1920. New York: American Institute of Accountants, 1921. Available at https://hdl.handle.net/2027/uc1.$b101697.Google Scholar
Atack, Jeremy, Bateman, Fred, and Margo, Robert A.. “Capital Deepening and the Rise of the Factory: The American Experience during the Nineteenth Century.” Economic History Review 58, no. 3 (2005): 586–95.CrossRefGoogle Scholar
Bloom, Nicholas, and Van Reenen, John. “Measuring and Explaining Management Practices across Firms and Countries.” Quarterly Journal of Economics 122, no. 4 (2007): 1351–408.CrossRefGoogle Scholar
Bloom, Nicholas, and Van Reenen, John. “Why Do Management Practices Differ across Firms and Countries?” Journal of Economic Perspectives 24, no. 1 (2010): 203–24.CrossRefGoogle Scholar
Brief, Richard P. “Nineteenth Century Accounting Error.” Journal of Accounting Research 3, no. 1 (1965): 12–31.CrossRefGoogle Scholar
Chandler, Alfred. The Visible Hand: The Managerial Revolution in American Business. Cambridge, MA: Belknap Press, 1977.Google Scholar
Clark, Christopher. The Roots of Rural Capitalism: Western Massachusetts, 1780–1860. Ithaca, NY: Cornell University Press, 1990.Google Scholar
Clark, Frederick C. “State Railroad Commissions, and How They May Be Made Effective.” Publications of the American Economic Association, vol. VI, 1891.Google Scholar
Crittenden, Samuel Worcester.An Inductive and Practical Treatise on Book-Keeping by Single and Double Entry: Counting-House and Commercial College Edition. Philadelphia: W.S. Fortescue & Company, 1883.Google Scholar
David, Paul A. “The Dynamo and the Computer: An Historical Perspective on the Modern Productivity Paradox.” American Economic Review 80, no. 2 (1990): 355–61.Google Scholar
Davis, Lance, and Louis Stettler, III.The New England Textile Industry, 1825–60: Trends and Fluctuations. Cambridge, MA: National Bureau of Economic Research, Inc., 1966.Google Scholar
Dodd, E. Merrick. American Business Corporations until 1860, with Special Reference to Massachusetts. Cambridge: Harvard University Press, 1954.Google Scholar
Edwards, J. R. (ed.). Reporting Fixed Assets in Nineteenth-Century Company Accounts: Articles Reprinted from Various Books and Journals, 1849–1985. New York: Garland, 1986.Google Scholar
Fear, Jeffrey. Organizing Control: August Thyssen and the Construction of German Corporate Management. Cambridge: Harvard University Press, 2005.CrossRefGoogle Scholar
Fink, Albert. Cost of Railroad Transportation, Railroad Accounts, and Governmental Regulation of Railroad Tariffs. Louisville: John P. Morton, 1875.Google Scholar
Fleischman, Richard K., and Tyson, Thomas N.. “Cost Accounting during the Industrial Revolution: The Present State of Historical Knowledge.” Economic History Review 46, no. 3, New Series (1993): 503–17.Google Scholar
Garner, S. Paul. Evolution of Cost Accounting to 1925. Tuscaloosa: University of Alabama Press, 1954.Google Scholar
Graves, Oliver Finley (ed.). The Costing Heritage: Studies in Honor of S. Paul Garner. Harrisonburg, VA: Academy of Accounting Historians, 1991.Google Scholar
Johnson, H. Thomas, and Kaplan, Robert S.. Relevance Lost: The Rise and Fall of Management Accounting. Boston: Harvard Business School Press, 1987.Google Scholar
Khurana, Rakesh. From Higher Aims to Hired Hands: The Social Transformation of American Business Schools and the Unfulfilled Promise of Management as a Profession. Princeton: Princeton University Press, 2007.Google Scholar
Levenstein, Margaret. Accounting for Growth: Information Systems and the Creation of the Large Corporation. Stanford: Stanford University Press, 1998.Google Scholar
Lin, Fengyi, Guan, Liming, and Fang, Wenchang. “Heaping in Reported Earnings: Evidence from Monthly Financial Reports of Taiwanese Firms.” Emerging Markets Finance and Trade 47, no. 2 (2011): 62–73.CrossRefGoogle Scholar
Mayhew, Ira. A Practical System of Book-Keeping by Single and Double Entry. New York: D. Burgess & Co., 1853.Google Scholar
McCraw, Thomas K.Prophets of Regulation: Charles Francis Adams, Louis D. Brandeis, James M. Landis, Alfred E. Kahn. Cambridge, MA: Belknap Press of Harvard University Press, 1986.Google Scholar
McGouldrick, Paul F.New England Textiles in the Nineteenth Century; Profits and Investment. Cambridge: Harvard University Press, 1968.Google Scholar
McKendrick, Neil. “Josiah Wedgwood and Cost Accounting in the Industrial Revolution.” Economic History Review 23, no. 1 (1970): 45–67.CrossRefGoogle Scholar
McMillan, Keith. “The Science of Accounts: Bookkeeping Rooted in the Ideal of Science.” Accounting Historians Journal 25, no. 2 (1998): 1–33.CrossRefGoogle Scholar
McMillan, Keith. “The Institute of Accounts: A Community of the Competent.” Accounting, Business & Financial History 9, no. 1 (1999): 7–28.CrossRefGoogle Scholar
Merrill, Michael. “Putting ‘Capitalism’ in Its Place: A Review of Recent Literature.” William and Mary Quarterly 52, no. 2 (1995): 315–26.CrossRefGoogle Scholar
Miller, Steven J. (ed.). Benford’s Law: Theory and Applications. Princeton: Princeton University Press, 2015.Google Scholar
Miranti, Paul Jr.. Accountancy Comes of Age: The Development of an American Profession, 1886–1940. Chapel Hill: University of North Carolina Press, 1990.Google Scholar
Miranti, Paul Jr., and Loeb, Stephen E.. The Institute of Accounts: Nineteenth-Century Origins of Accounting Professionalism in the United States. New York: Routledge, 2004.Google Scholar
Mokyr, Joel. The Gifts of Athena: Historical Origins of the Knowledge Economy. Princeton: Princeton University Press, 2004.Google Scholar
Mokyr, Joel, and Cormac, Ó Gráda. “Emigration and Poverty in Prefamine Ireland.” Explorations in Economic History 19, no. 4 (1982): 360–84.CrossRefGoogle Scholar
Nye, John, and Moul, Charles. “The Political Economy of Numbers: On the Application of Benford’s Law to International Macroeconomic Statistics.” B.E. Journal of Macroeconomics 7, no. 1 (2007): 1–14.CrossRefGoogle Scholar
Oldroyd, D. “Through a Glass Clearly: Management Practice on the Bowes Family Estates c. 1700–70 as Revealed by the Accounts.” Accounting, Business & Financial History 9, no. 2 (1999): 175–201.CrossRefGoogle Scholar
Parker, Lee D., and Fleischman, Richard K.. What Is Past Is Prologue: Cost Accounting in the British Industrial Revolution, 1760–1850. New Works in Accounting History. New York: Garland, 1997.Google Scholar
Pollard, Sidney. The Genesis of Modern Management; A Study of the Industrial Revolution in Great Britain. London: E. Arnold, 1965.Google Scholar
Poovey, Mary. A History of the Modern Fact: Problems of Knowledge in the Sciences of Wealth and Society. Chicago: University of Chicago Press, 1998.CrossRefGoogle Scholar
Previts, Gary John, and Dubis Merino, Barbara. A History of Accountancy in the United States: The Cultural Significance of Accounting. Columbus: Ohio State University Press, 1997.Google Scholar
Romeo, George C., and Larissa S. Kyj. “Paving the Way for the NYSSCPA: The Institute of Accounts.” CPA Journal 67, no. 6 (1997). Available at http://archives.cpajournal.com/1997/0697/9706toc.htm.Google Scholar
Rosenberg, Nathan, and Trajtenberg, Manuel. “A General-Purpose Technology at Work: The Corliss Steam Engine in the Late-Nineteenth-Century United States.” Journal of Economic History 64, no. 1 (2004): 61–99.CrossRefGoogle Scholar
Rosenthal, Caitlin. “From Memory to Mastery: Accounting for Control in America, 1750–1880.” Enterprise & Society 14, no. 4 (2013): 732–48.CrossRefGoogle Scholar
Rosenthal, Caitlin. “Massachusetts Corporations Accounting Data, 1870–1895 and Accountants’ Index Publications.” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2020-07-03. https://doi.org/10.3886/E119566V1.Google Scholar
Rosentrater, Ray. “Faking Real Data.” Math Horizons 25, no. 2 (2017): 24–26.CrossRefGoogle Scholar
Rothenberg, Winifred B. “Farm Account Books: Problems and Possibilities.” Agricultural History 58, no. 2 (April 1, 1984): 106–12.Google Scholar
Rothenberg, Winifred Barr. “Farm Account Books: Problems and Possibilities.” Agricultural History 58, no. 2 (1984): 106–12.Google Scholar
Rothenberg, Winifred Barr. From Market-Places to a Market Economy: The Transformation of Rural Massachusetts, 1750–1850. Chicago: University of Chicago Press, 1992.Google Scholar
Sangster, Alan. “The Earliest Known Treatise on Double Entry Bookkeeping by Marino De Raphaeli.” Accounting Historians Journal 42, no. 2 (2015): 1–33.CrossRefGoogle Scholar
Schakenbach, Regele, Lindsay. Manufacturing Advantage: War, the State, and the Origins of American Industry, 1776–1848. Baltimore: Johns Hopkins University Press, 2019.Google Scholar
Schumpeter, Joseph. Capitalism, Socialism, and Democracy. London: Routledge, 2010 [1950].CrossRefGoogle Scholar
Scranton, Philip. Endless Novelty: Specialty Production and American Industrialization, 1865–1925. Princeton: Princeton University Press, 1997.CrossRefGoogle Scholar
Secretary of the Commonwealth of Massachusetts (SCM). Abstract of the Certificates of Corporations. Boston: State Library of Massachusetts, 1871–1895.Google Scholar
Secretary of the Commonwealth of Massachusetts (SCM). “Abstract of the Returns of Joint Stock Companies, for the Years 1851, 1852, 1853, under the Act of May 15, 1851, Ch. 133, 1853 and 1854.” Boston: State Library of Massachusetts, various years.Google Scholar
Sombart, Werner. The Quintessence of Capitalism: A Study of the History and Psychology of the Modern Business Man. Translated by Epstein, Mortimer. New York: H. Fertig, 1967 [1915].Google Scholar
Wallis, John Joseph. “Constitutions, Corporations, and Corruption: American States and Constitutional Change, 1842 to 1852.” Journal of Economic History 65, no. 1 (2005): 211–56.CrossRefGoogle Scholar
Weber, Max. General Economic History. Translated by Knight, Frank. Glencoe IL: Free Press, 1950 [1927].Google Scholar
Wood, Alfred. Co-operative Book-Keeping: A Text Book for Students, 5th ed. Manchester, England: Co-operative Union, 1907.Google Scholar
Yates, JoAnne. Control through Communication: The Rise of System in American Management. Baltimore: Johns Hopkins University Press, 1989.Google Scholar
Zakim, Michael. “Bookkeeping as Ideology: Capitalist Knowledge in Nineteenth-Century America.” Interactive Journal of Early American Life 6, no. 3 (2006).Google Scholar
Zakim, Michael. Accounting for Capitalism: The World the Clerk Made. Chicago: The University of Chicago Press, 2018.CrossRefGoogle Scholar