The construction of cost accounting systems in Britain to 1900: The case of the coal, iron and steel industries

Research into the development of costing systems during the last 20 or so years has begun to challenge the previously widely held view that little by way of progress was made before the end of the nineteenth century. Much of this later research, however, did not include consideration of developments between c.1830 and 1900. The paper does two things: it attempts to fill this gap by presenting the results of our recent archival research into costing systems used by British companies in the coal, iron and steel industries and, in the light of this and other work, suggests that a new conventional wisdom as to the development of accounting systems in British industry in the nineteenth century needs to be adopted by historians. In particular, we find that the widely held view that cost and financial accounting had separate roots is not supported by the evidence, which instead shows that British managers in the industries examined developed a system of integrated accounting to help them manage businesses that were becoming increasingly larger and more complex. Furthermore, despite the lack of any significant discussion of the problems faced by businessmen within the accounting literature until the end of the nineteenth century, there was a significant degree of diffusion in key areas of accounting practice. Such areas included the preparation of cost sheets to establish departmental costs of production, the apportionment of overheads to identify total cost, and the use of transfer prices to track the movement of goods between departments.