Reviewed by Sudarwan Case Western Reserve University
This book is an anthology of papers from Accounting His-tory, the former journal of the Accounting History Society of England and Wales, published during the years 1976-1986. Boys and Freear selected 26 of 56 articles published in the journal. The anthology covers several eras and topics in accounting history from the 15th century to the 20th century. It is divided into eight classifications: General, Methodology, Auditing, Firm/Industry Studies, Corporate Accounting, Education, Bibliographies/Biographies, and Miscellaneous.
Three articles in the “General” section emphasize the im-portance of accounting history to the accounting profession and to the entire economic community. The subjects of this section are that: 1) accounting history (“was”) has a relationship with the present (“is”) and the future (“ought”); 2) present problems may be rooted in past solutions; 3) history provides parallels from which we can obtain lessons; and 4) the study of account-ing history should be useful in solving current problems.
The “Methodology” section discusses methods and tech-niques available to researchers and provides a taxonomy for accounting history to satisfy requirements of historical research, 1) factographic (what was), 2) explanatory (why was that so), and 3) theoretical (what follows from the study of the past). Readers are exposed to the relationship between the concept of capitalism and the emergence of bookkeeping, and to the ways accounting history research establishes historical facts.
However, the discussion falls short of giving readers clues as to the circumstances in which a certain methodology is most appropriate. There is also no discussion about the advantages and disadvantages of each method. There is only a vague suggestion that a combination of methods can be used in the study of accounting history.
These first two sections seem to be intended to provide a basis for selecting from articles included in the next sections. One expects that the rest of the book will reveal a link between the past, present, and future development of accounting. On the contrary, most of the subsequent readings are confined to a description or discussion of accounting practice in specific periods. With the exception of the paper by Freear in the “Firm/ Industry Studies” section, there is little provided to relate historical facts to current and future matters.
The “Auditing” section analyzes audit practices in the rail-way and marine insurance industries during 1840s-1860s. The matters considered include conflicts between managers, share-holders, and government commissioners in the enactment of the 1845 Companies Clause Consolidation Act and the 1867 Railways Companies Act as to who had the authority to appoint auditors for railway companies and what were appropriate auditor qualifications.
The audit requirement for marine insurance companies was established under the provisions of the 1844 Joint Stock Companies Act and under the 1845 Act mentioned above. What is important to recall about this period is that an auditor was required to own at least one share in the audited company; that auditors were not necessarily public accountants; and that audit reports had various forms, but were stated as a “true and correct” balance sheet.
The focus of the “Firm/Industry Studies” section is the relationship between cost accounting systems and pricing policy in a monopoly or free market system and the related profit measurement systems implemented during the period from the 16th to 19th century.
During this period both acquisition and repair of fixed as-sets were considered expenses and charged as incurred; busi-ness and personal expenses were not separated; accrued ex-penses were embedded in reserve and provision accounts; in-ventories were valued at current estimated price; income smoothing was a common, practice; and accounting informa-tion was available and used for managerial purposes.
This section also gives examples of how cost accounting systems can be misused through the use and abuse of excessive profits from government contracts. The authors enrich the analysis by providing documents as examples of balance sheets and income statements of companies in the late 19th century. However, neither the illustrated financial statements nor the authors’ analysis mentions “how” revenues were measured but only the measurement of expense. This omission prevents readers from obtaining a complete picture of income determination as commonly practiced in the period.
The remainder of the book indeed could be classified as “Miscellaneous”. It contains historical facts and short descrip-tions about the development of accounting thought, accounting education, profiles of notable individuals in the U.K. accounting profession, and other short analyses of early accounting practices.
A critical paper about early 20th century accounting thought by Godfrey is the most interesting reading in this sec-tion. He argues that accounting thought before 1960 was: 1) developed by a piecemeal approach rather than by development of a single theoretical framework; 2) sought apologetics rather than appraised; 3) classified rather than analyzed; 4) particularized rather than synthesized. With the exception of Paton, Canning, Sweeney, and McNeal, who were major accounting scholars in this period, he argues, others reflected inherited deficiencies. However, Godfrey fails to elaborate on the impact of such alleged deficiencies on current problems or how such deficiencies might have been resolved. Further, he does not compare early accounting thought with current issues or assess relative advantages and disadvantages as such.
In general, this book of readings falls short of fully explaining selected elements in the development of accounting thought and practice. If explaining the progress is an essential part of historical study, this book does not fulfill one of its purposes. However, this book does supply reading material to discuss accounting practice and problems in the past. Willing readers will find the historical description a good starting point for further analysis and for undertaking their own agenda.
