Reviewed By George J. Murphy University of Saskatchewan

Malcolm, Alexander. A Treatise of Bookkeeping or Merchants Accounts in the Italian Method of Debtor and Creditor (Lon-don, 1731. Reprint ed., New York: Garland Press, 1986, 264 pp., $40.00).

Mair, John. Bookkeeping Modernized or Merchant Accounts by Double Entry (Edinburgh, 1793. Reprint ed., New York: Arno Press, 1978, pp., $36.00).
Mitchell, William. A New and Complete System of Bookkeeping By An Improved Method of Double Entry (Philadelphia, 1796. Reprint ed., New York: Arno Press, 1978, 450 pp., $26.00).

The accounting treatises of Malcolm [1731], Mair [1768]1 and Mitchell [1796] span most of the eighteenth century — the midcentury between Pacioli’s famous work (1494) and the pre-sent time. They invite comparison with earlier and later ac-complishments, and with changes within that industrial-advent century itself. The Malcolm text is the first edition of two, the later being 1743, The Mair text is the sixth of nine editions spanning the years 1773 to 1807 with an earlier work running through eight editions from 1736 to 1767. The Mitchell text is a single edition and one of the earliest American treatises [Previts and Merino, 1979, p. 28; Sheldahl, 1985]. Malcolm and Mair are two of a notable group of Scottish authors of that era [Yamey et al., 1963, p. 172].
1Mair died in 1769, a year after he wrote this text. The actual edition of the text examined is the sixth, printed in 1793.

Bookkeeping Aspects

As with Pacioli, all three authors are concerned with the bookkeeping of merchants. A particular focus of Malcolm [p. 3] and Mair [p. 8] is to set forth rules and principles while Mitchell [p. v] attempts to simplify these types of treatises — particularly Mair’s — which he claims to be “too diffuse” and “so overburdened with rules . . . that the young bookkeeper . . . gets bewildered and lost.” The larger part of the Malcolm and Mair and virtually all of the Mitchell texts illustrate complete sets of records. Pacioli, however, provides neither general rules and principles of double entry nor sets of illustrative specimen accounts.

The three authors indicate little difference in the declared purpose of bookkeeping. Both Malcolm [p. 2] and Mair [p. 1] collapse such purposes into knowing what the quantities and value of merchandise on hand are and what profit or loss on sale of goods is. Mitchell [pp. 1, 210] affirms these balance sheet interests but speaks to the concern for profit only tangen-tially and much later in his text. Both Malcolm and Mair endorse the use of the three books of accounting recommended by Pacioli — the waste (day or memorial) book which simply notes in sufficient detail what each transaction is so that it can later “at leisure and retirement, thought and deliberation” [Mair, p. 7] be set up into its constituent debit and credit aspects in the journal and from thence to be transformed to the third book, the (general) ledger. Malcolm and Mair admit that the waste book and the journal could be efficiently combined, and both demonstrate the use of a cash book as a specialized book of original entry which would permit a single monthly cash account posting to the ledger, relieving the latter account of much space-consuming detail. Mitchell [p. vi] provides barely twenty-five pages of commentary in his 450-page book, believing that the student can best learn from “paying attention to actual statements of accounts.” His concern is with bookkeeping efficiency and to this end he recommends the greater use of specialized books of original entry permitting monthly posting totals for a good number of accounts — cash, merchandise, accounts and bills receivable and payable. This advocacy may be part of a larger experiment by several authors across Europe at that time to respond to the increasing size and activity of businesses [ten Have, 1976, pp. 106-108]. It is to be distinguished from the introduction of the journal-ledger which is more of an attempt to incorporate all transactions and summaries (excluding subsidiary ledger receivables and payables) into the one synoptic record.

Though Mitchell’s system achieves posting economies and goes beyond that of Malcolm and Mair in its use of a ledger control account for the subsidiary records (of bills receivable & payable), it fails to disclose in the books of account the value, quantities on hand and profits on each type of inventory (be-cause all goods for sale are recorded by monthly totals to the one merchandise ledger account) as the other texts do. This failure represents a considerable sacrifice in formal ledger inventory control and profit analysis. Mitchell [p. 448] may in part realize this shortcoming by implying that such analysis can take place as needed outside the accounts. Quite clearly, the important routines of general ledger accounts controlling subsidiary detailed records had not been completely worked out by these authors.

Both Malcolm3 and Mair use personification to determine what is to be debited and credited. This method tediously carries forward the notions of “owing to” and “owing by” implicit in earliest creditor and debtor accounts to explain the crediting and debiting of the real accounts of cash, inventory and fixed assets. Here again, our present rule that increases in assets are debits and increases in equities are credits (with everything else flowing from that) is infinitely more elegant as a pedagogical guide. It can also be imagined that when the profit and loss accounts are explained as a “fiction (or) defect . . . contrived to supply the want of a real or personal one” [Mair, p. 18; Malcolm, p. 18], that the subdivision of accounts into assets and equities — a subdivision that may have been aided by the mid-nineteenth century incorporating statutes — is a long way off. On the other hand, a foreshadowing of contemporary comment is Mair’s [p. 14] Ijiri-like phrasing of the relationship between debit and credit as having “a mutual connection and independence, the one being the ground, condition, or cause of the other.” Similarly, his justly famous lyrical passage [pp. 80-81] relating the role of inventory in a firm’s affairs and the resultant reflection and tracing of its sale in the various ledger accounts is an admiral description of both economic activity and the bookkeeping routines that attempt to mirror that activity.

Accounting Aspects

Only Malcolm and Mair offer a modicum of commentary on matters we now think to be the heart and substance of accounting: the barest minimum of attention is paid to issues of asset valuation, profit determination, accrual accounting or for the detailed internal records required for industrial operations; and only with lively imagination can any of the present day accounting convenience of consistency, matching, objectivity, realization or uniformity be read into the commentary.

No hint of accrual accounting is evident: interest is picked up at the time of making a loan — presumably so that the receivable account would be stated in its entirety at the due date; and illustrations are generally not provided in which interest would have had to be accrued or deferred.4 Examples of bad debts provide the alternative of writing the accounts off completely or grouping them with other bad debts as a viable asset. No discussion is put forward — as it is with Hamilton [1788, p. 334] — to write off some estimate of uncollectibility. Similarly, virtually nothing is mentioned of any aspect of cost accounting though some evidence of detailed manufacturing records that mirrored the conversion of raw material through the factory into finished goods had by this time been exhibited in actual accounting practices [Garner, 1954, Ch. 2] and in late seventeenth and mid and late eighteenth century accounting treatises [Edwards, 1937, pp. 225-227; Hamilton, 1788, pp. 487-88].

A medley of alternatives is provided for the valuation of assets. For inventory, Malcolm [p. 89] offers the alternatives of cost or current value with a preference for the former, while Mair [p. 69] suggests an undefined “prime cost.” Malcolm also suggests that “current rates” should be used for winding-up purposes. No hint of the lower of cost or market can be inferred in any of these authors. Neither consistency in valuation nor cost allocation depreciation is mentioned much less urged by the authors. Though some depreciation had been observed by this time in late 18th century records [Pollard, 1963, p. 134], its
4One exception was noted in which full interest on a bottomree loan account was viewed as an asset though collection had not been made [Malcolm, folios 9 and 17 of Ledger 1].

textbook advocacy would not be generally observed until the corporate industrial accounting of the mid to late nineteenth century.5 The barest hints of the concepts of periodicity (annual closing out of accounts are recommended) and entity (personal and household expense accounts are pinpointed and the sep-aration of the manager’s accounts from any partnership to which he belonged is recommended) can be with imagination inferred. An awareness of conservatism and the objectivity of realization can also be mildly sensed in the concern that reflecting fluctuations in prices may be premature [Malcolm, p. 89]. More generally, however, though there is some small pointing towards the historic cost principle, it would seem that researchers looking for the treatise origins of our existing traditional accounting concepts will find more fertile fields in the industrial and corporately organized nineteenth century.

Eighteenth-century authors [Malcolm, p. iii] commonly extol the double entry method as “perfect” and “comprehensive.” The perfection relates largely to the simple mechanical equality of debit and credit balancing. Little explicit understanding is betrayed in these three texts of the double entry’s unique purpose in, and method of, introducing the nominal (income) accounts to explain the changes in the real and personal accounts of the balance sheet. Indeed, though the purpose of the double entry method is admitted to include profit and loss, the ambiguity of the authors in this regard is reflected in their suggesting that these accounts arise out of the “defect” or “want” in the real and personal accounts. Similarly, and possibly consistently, the approach to determining profits is a balance sheet one in which revenues are first carried to asset accounts which are later analyzed and adjusted for their profit or loss content. The authors are on somewhat firmer ground when they proclaim comprehensiveness as a unique feature since the method contemplated the recording of all transation-based firm activity.

The texts of Malcolm and particularly Mair [Sheldahl, 1985, p. 7; Mepham and Stone, 1977] were popular and well received in their day. Why then did these texts not incorporate some of the more advanced bookkeeping techniques then in actual use and being demonstrated in other treatises? Hamilton’s book [1788] is far more sophisticated and indeed may be the most “modern” text of its time, touching as it does on issues relating to rudimentary depreciation, bad debt estimates, residual income evaluation, process cost accounting and the problems of allocation [Mepham, 1983]. Similarly, textile company cost records [Stone, 1973; Porter, 1980] of the very early nineteenth century (and probably earlier)6 display a variety of accounting techniques — cost centers, predetermined overhead rates and intracompany pricing — that have no ancestry in these texts. It may be that the authors (Mair, p. 4) felt they were putting forward a very general approach to double-entry bookkeeping which could find application in any type of business including manufacturing, and that the special and more complex situations could be handled by treatises devoted exclusively to particular industries.7 Though different in nature, the discrepancy may be no more anomalous than the gulf one finds between the ever-changing rule-laden editions of present-day texts and the best of actual practices, knowledge and thought [Kaplan, 1984, p. 407; Zeff, 1979]. Then, as now, the normative, original, innovative (much less radical!) may not have been what the market was demanding; and the expectation that one should look for these attributes in popular textbooks of any era may be unrealisitic.

Reconsidering Some Speculations

The accounting discipline is particularly fortunate amongst the social sciences in having a relatively great array of historical documents — texts and records stretching over sev-eral centuries — to help pace its evolution and assess its contribution. These three texts, specific to a given period, constitute a very small portion of those documents and there-fore offer the opportunity for only brief and necessarily re-stricted commentary on two recurring questions: was the eighteenth century the latter part of a long period of stagnation in the evolution of accounting texts [Littleton, 1933, p. 9; Winjum, 1972, pp. 108-109] and was double entry bookkeep-

6Stone suggests that “because of balances carried forward from a prior ledger, it is clear that the [textile] mill was in operation at an earlier date [than 1810] with a fully developed accounting system as described in this paper” [Stone, 1973, p. 71].
7The Dodson text [Chatfield, 1974, p. 100] illustrates a shoemaker’s accounts. Indeed, Mair’s text gives extensive illustrations of accounts for sugar and tobacco merchant traders.

ing the engine that Sombart maintains propelled capitalism [Yamey, 1964]?

As previously implied, the bookkeeping routines recom-mended in these texts do not differ in substantive measure from those put forward by Pacioli. Specialized books of original entry whereby column totals are posted to ledger accounts were part of eighteenth century innovation; however the ledger recommended remains a jumble (partly because it was bound!) of innumerable, unordered, individual accounts of debtors and creditors and of the variety of merchandise accounts in which merchants dealt. What is now easy to overlook as terribly prosaic — the introduction of loose-leaf records and the importance of general ledger accounts controlling the detail of subsidiary records — would have aided eighteenth century bookkeeping greatly. At least three-quarters of the three texts contain extended examples of whole sets of records and the commentary thereon is largely confined to the technicalities of what is to be debited and credited and to how a balancing of the accounts is to be obtained. There is only passing interest in valuation and little that is explicit relating to depreciation, to accrual accounting in any of its forms, and to the establishment of accounting principles. Similarly, though the industrial revolution is beginning to emerge toward the end of the century, no guidance is offered in how the merchant bookkeeping illustrated could be adapted to the distinctive needs of this changing environment. The practicing accountant of this era would find little textual guidance beyond introductory bookkeeping routines. “Stagnation” may not be too unkind an adjective to append to this era of bookkeeping pedagogy as evidenced by these three texts. Students using Pacioli and aided by an instructor’s chalkboard examples of illustrative specimen accounts may have been at no disadvantage in learning the bookkeeping routines recommended by these authors .

The Sombart thesis is quite properly debated in contexts much broader than an examination of these three texts of the eighteenth century will permit [Braudel, 1982, pp. 572-578; Yamey, 1964; Winjum, 1972, pp. 15-24]. Though the thesis seems to have fewer adherents among accountants than among non-accountants, it should not be too difficult for the accountant to recognize in these texts some implicit instruction in the Sombartian notion of rationalized profit-seeking. The profit and loss ledger account to which all the nominal accounts are to be annually closed, portrays the operations of the firm in fairly detailed form. (It should be remembered that it is, in part, on the basis of the very irregular profit determination exhibited in extant records that Sombart’s thesis is dismissed [Yamey, 1964, p. 125]. Gross margins on each type of merchandise are shown, together with the results from activities relating to insurance, bottomree loans, voyages, consignment accounts, rents and the borrowing or lending of money. Nor are such “results” encumbered by the frequently questionable decision-useful refinements of present-day cost-allocated ac-crual accounting. Indeed, information exists in terms of vari-able receipts and expenditures to know in some instances the rough magnitude and source of gross contribution margins on cost, and thereby give some direction to the merchant in the allocation of resources within the firm. There is however, no commentary in the texts elaborating that such information may be put to this end nor to more general return on investment considerations.

Historical treatises are well worth thumbing through for both practicing and academic accountants. They alert us to the pace of change, to the problems that have been overcome and to the background of those problems that are as yet unresolved. They prompt us to ask of the present the very question that springs so readily to mind with regard to the past: Are we handling the accounting task any better now than we did then? And occasionally they reach across the centuries to touch us with an important and sad reminder of the immutability of the human condition as we examine an example of a detailed bill of lading for a cargo of African slaves to be sold in the sugar colonies of the West Indies [Mair, p. 490] and as we read the author’s simple instruction to the factor to “sell off the negroes as (you) would do any other sort of merchandise” [Mair, p. 403].

REFERENCES

Braudel, F., The Wheels of Commerce. Harper & Row, 1982.
Chatfield, M., A History of Accounting Thought. The Dryden Press, 1974.
Edwards, R. S., “Some Notes on the Early Literature and Development of Cost Accounting in Great Britain — II.” The Accountant (August 14, 1937), pp. 225-231.
Garner, S. P., Evolution of Cost Accounting to 1925. University of Alabama Press, 1954.
Hamilton, Robert, An Introduction to Merchandise, 1788. Reprinted by Garland Publishing Inc., 1982.
Kaplan, R., “The Evolution of Management Accounting.” The Accounting Review (July, 1984), pp. 390-418.
Littleton, A. C., Accounting Evolution to 1900. Russell & Russell, 1933.
Mepham, M. J., “Robert Hamilton’s Contribution to Accounting.” The Accounting Review (January, 1983), pp. 43-57.
and Stone, W. E., “John Mair, MA.: Author of the First Classic
Book-keeping Series.” Accounting and Business Research (Spring, 1977), pp. 128-134.
Pollard, S., “Capital Accounting in the Industrial Revolution.” Yorkshire Bulletin of Economic and Social Research (Nov., 1963), pp. 75-91. Reprinted in Chatfield, M., Contemporary Studies in the Evolution ofAccounting Thought, Dickenson, 1968, pp. 113-134.
Porter, David M., “The Waltham System and Early American Textile Cost Accounting 1813-1848.” The Accounting Historians Journal (Spring, 1980), pp. 1-15.
Previts, G. J. and Merino, B. D., A History of Accounting in America. John Wiley & Sons, 1979.
Sheldahl, T. K., “America’s Earliest Recorded Text in Accounting: Sargeant’s 1789 Book.” The Accounting Historians Journal (Fall, 1985), pp. 1-42.
Stone, Williard E., “An Early English Cotton Mill Cost Accounting System: Charlton Mills, 1810 – 1889.” Accounting and Business Research (Winter, 1973), pp. 71-78.
ten Have, O., The History of Accountancy, Bay Books, 1976.
The Economist, “Back to the Age of Falling Prices” (July 13, 1974).
Winjum, James, The Role of Accounting in the Economic Development of England: 1500-1750. Center for International Education and Research in Accounting, 1972.
Yamey, B. S., “Accounting and the Rise of Capitalism: Further Notes on a Theme by Sombart.” Journal of Accounting Research (August 1964), pp. 117-36.
, Edey, H. C. and Thomson, H. W., Accounting in England and
Scotland: 1543-1800. Sweet & Maxwell, 1963, reprinted by Garland Pub-lishing Inc., 1982.
Zeff, S., “Theory and ‘Intermediate’ Accounting.” The Accounting Review (July, 1979), pp. 592-594.