Early uses of accounting: to help in firm management or to pursue an agenda?

You may think that accounting practices are straightforward and have been in place for a long time. Actually, good practices are actually fairly recent, especially in terms of making them useful diagnostic tools for firm management. But with sophistication comes also the temptation to become creative and use accounting for purposes that are borderline legal, such as escaping taxation, or outright fraud. For this, you would need to be a sophisticated accountant, and one would think that one would not find such sophistication a century ago, let alone during the British Industrial Revolution.

Steven Toms and Alice Shepherd show that in the second case there were surprising sophistication, with creative accounting being used by industrialists to counter the "Ten-Hour" movement that sought to limit work hours. Specifically, they show how the the numbers from a cotton manufacturer were used in the policy debate and how his creative accounting made it appear as though he was facing excruciatingly high fix costs and thus low profits. Where he got creative is with the treatment of capital accumulation, thereby proving that the accusation of making most of his supposedly high profits during the last hour of the shifts was not true.