Cost and Management Accounting in Pre-Industrial Revolution Spain

By Gutiérrez, Fernando; Larrinaga, Carlos et al. | The Accounting Historians Journal, June 2005 | Go to article overview
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Cost and Management Accounting in Pre-Industrial Revolution Spain

Gutiérrez, Fernando, Larrinaga, Carlos, Núñez, Miriam, The Accounting Historians Journal

Abstract: In traditional Anglo-Saxon accounting historiography the birth of sophisticated management accounting practices was dated at the end of the 19th century [Jonhson and Kaplan, 1987]. However, some more recent investigations have questioned this idea and demonstrate the existence of sophisticated management accounting and control techniques before the industrial revolution in differing contexts such as the United Kingdom, the United States and Spain. Fleischman and Parker [1991] have demonstrated that these practices were present in a significant number of British companies. However, evidence for Spain is based on isolated case studies. While case studies are essential to explain how these techniques were used, there has been no research to assess their frequency in Spain before the industrial revolution. By examining files concerning 13 large and mediumsized 18th century Spanish companies, this paper corroborates Fleischman and Barker's [1991] thesis. It reveals that knowledge of sophisticated cost accounting methods was fairly widespread in Spain during the 18th century. Interestingly, however, the knowledge and use of these techniques were not connected to economic success and to the industrial revolution, as was the case in the United Kingdom.


Management accounting historiography traditionally sustained the thesis that most of the costing techniques used before the late 19th century were very rudimentary [see Fleischman and Tyson, 1993; Loft, 1995].1 According to Chandler, modern cost accounting emerged in the U.S.A. after 1850 with the advent of the railroads and large companies' needs for sophisticated administration and coordination [see Johnson, 1972]. Pollard [1965] arrived at a similar conclusion in the British context and argued that the development of cost accounting to support management was not among the achievements of the British industrial revolution. His explanation was based on the high profits the early companies in the industrial revolution achieved (which rendered cost accounting unnecessary), and on the lack of integration between cost and financial accounting.

The majority of the early Anglo-Saxon studies that dated the advent of modern cost accounting to the late 19th century were not based on the examination of business archives which might reveal accounting practices in real settings. Rather, this conclusion was based on the lack of references to costing techniques in accounting manuals (primarily directed to merchants) before the 19th century [Johnson, 1972; Fleischman and Tyson, 1993; Fleischman and Parker, 1997]. This argument was also made in non-Anglo-Saxon countries. For example, in his examination of the history and doctrines of European accounting, Vlaemminck [1956] contended that industrial accounting attracted the attention of accounting authors only from the beginning of the 19th century and that practice preceded accounting treaties.2

In recent decades some accounting historians have tested traditional assumptions about the use of cost techniques by investigating surviving business records [Johnson, 1972; Fleischman and Parker, 1990, 1991; Edwards and Newell, 1991; Fleischman et al., 1996; Fleischman and Tyson, 1993, 1996]. However, until very recently, the extensive study of early cost accounting practices through the examination of surviving business archives in the U.K. and U.S. has not been matched by studies in continental Europe.

The reasons for this are difficult to fathom. Admittedly, the British industrial revolution was unique and associated with particular socio-political changes [Wilward and Saul, 1973]. Arguably, the introduction of sophisticated costing techniques by British entrepreneurs during the industrialization could have resulted from other significant economic advances [Fleischman and Parker, 1991]. But continental European manufactures reached a comparable level of complexity and technological innovation [Herr, 1958; Townsend, 1791].

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