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ABSTRACT
The history of accounting in all countries is punctuated by significant gaps in our knowledge. For Britain, where topics such as cost accounting have been the subject of a substantive research effort, there is still much we do not know. It has been suggested that engineers played an important role in the development of costing during the nineteenth century but that such activity occurred outside the double-entry bookkeeping system. The lack of relevant contemporary literature and surviving business records has made it difficult to examine the validity of such claims. This study reviews the surviving evidence from the agricultural implement manufacturer, Ransomes of Ipswich, in an attempt to provide a better understanding of the emergence of costing within the engineering sector during the 1850s and 1860s.
Acknowledgements
We would like to express our thanks to previous and current archivists at the Museum of English Rural Life for their patience and assistance in aiding our study of the Ransomes’ archives. We would also like to thank participants at the International Festschrift in Honour of Professor Yannick Lemarchand held in Nantes on 13–14 November 2015 for their comments on an earlier draft of this paper, in particular Yannick himself and Richard Baker, and the two anonymous AHR reviewers. We alone remain responsible for the final content.
Disclosure statement
No potential conflict of interest was reported by the authors.
Notes
1. Reeve also refers to an exchange of memos in February 1861 between Robert Charles Ransome and John Wood, whereupon the former asked for a ‘brief account of the various books, tickets, etc., in use in the Manufacturing Office, and for a statement which would “simply explain to a junior clerk or to a stranger, the various operations by which we arrive at our results”’ (TR RAN AD 3/11, f.102). It is indicated that, in his reply, Wood provided
[A] rough and condensed account of the various books, forms, etc., used in the Manufacturing Office, and appertaining thereunto, showing the several operations by which Ransomes & Sims arrive at the prime costs of manufactured goods, etc., prepared pursuant to instructions of 2mo. 16. 1861 [i.e. 16 February 1861]. (quoted in TR RAN AD 3/11, f.102)
2. Fowler established his business producing steam traction engines for agricultural use having initially co-operated with Ransomes during the early and mid 1850s.
3. Material in this paragraph draws on the research findings presented in Edwards (Citation2015).
4. ‘True cost' became the term widely used to describe a costing objective in Britain only with the rise of scientific costing in the early years of the twentieth century (Boyns and Edwards Citation2013, chapter 7).
5. DEB, introduced as the basis for record keeping at the Royal Small Arms Factory in the 1850s, was extended to the establishments located at the Woolwich Arsenal in 1864.
6. The question of whether indirect costs should include charges for depreciation and interest on capital invested featured prominently in debates about cost calculation at these government establishments.
7. Between 1789 and 1881, the business operated under the following titles: 1789 Robert Ransome; 1809 Ransome & Son; 1818 Ransome & Sons; 1825 J. & R. Ransome; 1830 J. R. & A. Ransome; 1846 Ransome & May; 1852 Ransome & Sims; 1869 Ransome, Sims & Head.
8. The 1809 partnership agreement indicates ownership of two patents: one dated 24 September 1803 for ‘chilling cast iron ploughshares’ and one dated 30 May 1808 for ‘improvements to ploughs’ (TR RAN CO1/1).
9. May left the firm to become a consulting engineer in London in 1851.
10. The balance accrued to W.D. Sims.
11. The partnership had taken on the title Ransomes, Sims & Jeffries in 1881.
12. Two types of ‘gain' (or ‘loss’) are shown: one ‘on Trade' and the other ‘on P. & L. acct.'.
13. The Trade Account may pre-date 1845, but this is the first surviving copy of such an account.
14. The first memo is addressed to Henry Mohum and the second to a Henry Mohun but the signs are that they were the same person.
15. As is noted below, the emphasis of sections is on product groups rather than a physical location or department. In his notes, Reeve suggests that the ‘instructions also laid it down that the same analysis into sections must be carried out in all other departments, that is to say, in the Stock Books, in the Goods Sent Away books, in orders to Works, etc.' (TR RAN AD 3/11, f.101).
16. The memorandum commences as follows: ‘All the accounts of every description, which are kept at the Orwell Works are kept in two sets of books, the Commercial and Manufacturing'.
17. Samuel Geater Stearn, of Brandeston, Suffolk, was the designer of the registered Suffolk Pig & Hog Troughs manufactured by Ransomes (TR RAN AD 7/39, f.119).
18. It is not recorded whether this percentage was on wages or materials or some combination of both, though later comments by Reeve (TR RAN AD 3/11, ff.102–103) reproduced below would suggest that it was on wages.
19. At the time the 1809 partnership agreement was signed, all of the capital was considered to have been provided by Robert Ransome.
20. The system presumably met with some approval from the accountancy profession since the chartered accountant, J.H.W. Pawlyn became company chairman in 1939. Having served his articles with Messrs. Champness, Corderoy & Company in London, Pawlyn then joined Price, Waterhouse & Co, in 1897, where he undertook the audit of Ransomes, Sims & Jeffries Ltd. He was appointed chief accountant at the Orwell Works in May 1901, temporarily becoming company secretary in early 1917, before joining the board of directors in July 1917 (‘Royal’ Citation1939, 72).
21. The 1878 memo (TR RAN AC 5/6/i) specifically notes that the annual ‘Prime Cost Analysis’ will be available at the end of January of the following year.
22. Such a situation was, of course, in marked contrast to that in France, where the cost and financial accounts had traditionally been conceived of as a single entity, enabling cost calculation to be carried out within the DEB system, until their separation as the result of the implementation of the first Plan Comptable in 1947 (Boyns, Edwards, and Nikitin Citation1997, 91).
23. For example, when the leading chartered accountants, Frederick Whinney and Edwin Waterhouse, were engaged by the government, in 1887, to advise on the costing system to be used by government military manufacturing establishments, Whinney described imputed rent as a ‘fancy item', interest on capital as ‘a very fancy item', and the inclusion of either simply a ‘matter of taste and opinion' (BPP Citation1888 (Citation212), q. 2075, q. 2088).
24. Reeve's account of costing at the Orwell Works in the early 1920s indicates that, at that date, interest on plant was included in shop charges, while depreciation of plant and machinery was included in trade expenses, though it is unclear when this latter practice commenced (TR RAN AD 3/11, f.18).
25. In the 1856 memo (TR RAN AC 5/6/iii, f.2), RCR notes that the company is still experimenting with steam threshing machines and that a special account should be opened to include ‘all the experimental work done for steam thrashing machines until we had arrived at standard machines’.