Some influences on the development of cost accounting

              M. C. Wells PROFESSOR OF ACCOUNTING UNIVERSITY OF SYDNEY
SOME INFLUENCES ON THE DEVELOPMENT OF COST ACCOUNTING
Abstract: The influence of engineers on the development of cost accounting in the closing decades of last century has been well recognized. The influence of econ-omists, the retarding effects of an obsession with industrial secrecy, and some curious effects of competition and the lack of it have not been fully explored. These matters are examined in this paper, together with some of the consequences of the efficiency movement, as seen in the costing system developed by Alexander Hamilton Church. The strengths and weaknesses of present-day cost accounting are related to this early period of development.
Attempts to calculate the cost of production before the Industrial Revolution have ben well documented and illustrated.1 Of course, they are not generally regarded as being "cost accounting". That title is normally reserved for integrated cost and financial account-ing systems which involve the allocation of indirect and fixed expenses. It is therefore assumed to be applicable only after the Industrial Revolution when those expenses were of such a magni-tude that they could no longer be ignored. We cannot, however, claim that cost accounting arose as a direct consequence of the Industrial Revolution. That is too simple an explanation. Extensive organizations (and therefore indirect expenses) were a feature of the putting-out system, and large factories (and therefore fixed costs) were not uncommon before 1800.2 The problem of calculat-ing the cost of production, including the allocation of indirect and fixed expenses, therefore existed well before the Industrial Revolu-tion but, curiously, little interest was taken in it by manufacturers and businessmen until well after the revolution was complete.3 More curious, perhaps, was the lack of interest shown by accoun-tans. There is nothing in the literature of accounting to indicate any deep or continuing interest in cost accounting as we now know it prior to 1970,4 and even into this century the nature and effects of fixed costs were not widely recognized.5
This article is adapted from a paper given at the Second World Congress of Accounting Historians, Atlanta, 1976.