Industrial organization and accounting innovation: charcoal ironmaking in England 1690–1783

Abstract

Accounting and business historians are showing a growing interest in the origin and development of cost and management accounting. Primary source studies have improved our understanding of past developments, but more original investigation is required in order to produce a sound basis for valid generalizations concerning such matters as: the nature and usefulness of management accounting systems employed by companies in the past; the relative sophistication of British and American systems; and the implications of accounting systems for British economic decline post-1870. In the absence of a sufficient ‘bedrock’ of relevant case studies, we believe that theories and proposed solutions about ‘what has gone wrong with management accounting’, for example, will be constructed on a flimsy base, possibly leading to the development of solutions which are flawed from the outset. The purposes of this paper are, therefore, to add to our knowledge of the development of accounting practice, to explore the nature of accounting change, and to examine the use of accounting systems as the basis for management decision making. The investigation is based on records relating to iron making in the region of Sheffield, England, during the period 1690–1783. The particular accounting practice to which we give attention is the development and use of an integrated system of cost and management accounting as the basis for business decision making.