The field of cost accounting has conquered a distinguished locus in the business community, given the importance of the cost-effective services it provides to management. It has received justified attention and significant support to achieve its objectives. Undoubtedly, highlighting its beginnings and stages of development by researchers and academics is a reasonable endeavour, as many of the seemingly modern features of cost accounting are inevitably rooted in practices that have evolved over time. Historical facts and evidence indicate that the financial accounting system is one of the oldest accounting systems. Such system is designed to focus on providing services to management through the making of balance sheets and the income statements, which were quite satisfactory for meeting the needs and expectations of small business management. 

However, with the rapid increase in the size of units and the diversity of their products, the outputs of financial accounting became insufficient, as management required detailed product data. This paved the way for the emergence of a new system that meets management's requirements in the functions of future planning and control, i.e., cost accounting. 

Early Foundations of Cost Accounting: A Study of the 14^th to 16^th Centuries

This section offers a historical synopsis of cost accounting's formation period, underlining major innovations, practices and documents, that captured the rise of systematic cost measurement. It is beneficial to begin this period with Roover's introduction, which begins Chapter 2 of Studies in Cost Analysis [1], which states, "The popular belief advanced by Professor [2] regarding the origins of cost accounting is that it originated in the 19^th century and developed significantly in subsequent centuries." 

Littleton justifies this belief by citing the impetus it received from the factory system and the widespread use of machinery in industrial production during that period. In this vein, Roover argues, "In fact, this popular idea is only partly true, for there are numerous indications that commercial records from the Middle Ages show that industrial accounting was in use as early as the beginning of the 14^th century." This fact has been highlighted by research into ancient Italian account books, such as those of merchant corporation from Italy, namely the Del Bene Company, Florentine manufacturers and importers of foreign woollen cloth in the first part of the 14^th century; and Francesco Dattini; The Prati merchant and woollen cloth maker at the end of that century; the Medici, also a woollen cloth maker, during the 15^th and 16^th centuries; and the directorial manager of the mint in the Republic of Ragusa.

Similarly, in the first chapter of his famous book, studies in Cost Analysis, Solomons [1] shares the opinion of his colleague Roover in his often-quoted article, The Historical Development of Costing. He begins by referring to the book by the mathematician Luca Pacioli, published in 1494, in which he devoted a chapter to a description of accounting in the fifteenth century. He mentions the most noteworthy innovation in the historical explanation of accounting. namely the evolution of the double-entry bookkeeping system. This system is indispensable in cost accounting history because it improves business transparency, provides control and accountability and above all enables foundation for cost tracking. This system is used in the highly developed civilizations of northern Italy, the Netherlands, and southern Germany, attributing the emergence of double-entry bookkeeping at that time to the very strong commercial influence of the Italians. At the same time, Solomons argues that Pacioli provided a description of the accounting practices of the time, but he did not systematically define the accounting technique at that time. Because manufacturing was carried out by fifteenth-century craftsmen who were strictly controlled by their guild rules, Solomons argues that there is nothing to indicate that record-keeping methods of the era developed a separation process. The outcomes of various activities provided methods for comparing expenses with revenues and determining selling prices, profit, and loss. 

Conversely, problems ascended during this period due to home-based craftsmen, the most important of which was controlling the inventory of materials used by home-based craftsmen. This was one of the problems that necessitated the need for cost accounting. In her excellent study of the accounting records of the Antwerp printing press, Christopher Plantin, Ms. Rover [3] identified the earliest use of accounting in industry as originating in the start of the 14^th century in Italy. In this regard, it is plausible to shed light on the primary signs of the rise of cost accounting features in this period. Edwards et al., [4] argues that the initial development in cost accounting happened in the rule of Henry VII of England, when a huge amount of small woollen producers, discontented with the numerous limits of the association, shifted from pastoral towns to large metropolises and well-known industrial communities, striving to sell their crops and products through channels beyond trade unions like organized guilds. 

Edwards and other critics also point out to another characteristic of cost accounting during this period, specifically when manufacturers began selling their products directly, without intermediaries. This led to intense competition among them, increasing the need for accurate and reliable cost records to be used in pricing, competition, and the struggle for survival in the market. Edwards et al.  continue that.

The period leading up to the British Industrial Revolution remained largely unexplored. Until the recent publication of the business ledgers of Daniel Hechstetter, the German manager of the English copper works from 1597 to 1633, they provided the most detailed set of business records for a British-based industrial enterprise during this period. 

The results of Edwards’ et al. study indicate that Daniel Hechstetter's business books and accounts reveal that several modern cost accounting concepts and procedures were in use by the 1600^s. This is the third feature of the early stages of cost accounting. Whereas Edwards and colleagues argue that the outcomes of this study have contributed to a shift in perceiving and understanding the growth of accounting procedures. A notable exception is Haydn Jones's reading of accounting practices in landed estates and equally in Welsh industry. Remarkably, the observation made by Jones demonstrates that the records and archives of the Mines Royal Co.'s copper smelting works, originated from the late 16^th century, located in Neath paid an expectational "attention to production, cost, and profitability" features that relate closely with the very foundational principles of modern cost accounting.

Notably, cost accounting ideas and practices were allegedly in operation at the silver and copper operations and use of several working companies in Keswick, Cumberland. These sorts of records are predominantly valued vis-à-vis accounting historians since their level of accuracy and of course the plain cost-consciousness showed by Daniel Hechstetter. Indeed, Hechstetter expertly conducted analyses to be able to acutely evaluate the longstanding practicality of the enterprise, profitability along with operational efficiency. Some scholars propose that the roots and origins of cost accounting might possibly range further back to Central Europe, where what is so called the Fugger family—who are able to manage the wide interests of both the copper and silver mining located in Carinthia and Tyrol, aside from a metalwork’s inauguration in 1577—retained quite comparable convictions and practices. Several accounting records result from one of these very mines comprise accounts for various sort of trade such as operations, shipping and transport, mining, foundry, iron and steel, ore, smelting, lead and overhead. Although there is no conclusive sign that these sorts of accounts were applied based on contemporary cost flow beliefs, indications to certain terms for example "prime costs" and "cost of production" imply an early comprehension and awareness of cost concepts. Based on this reasoning, it could be undoubtedly deduced that the origins of cost accounting, embodied by primitive forms of costing, were widely used in industries preceding the Industrial Revolution. It could be argued that a fourth feature of the cost accounting process can and should be identified, informed and supported by convincing historical evidence. 

Laying the Groundwork: Cost Accounting in the Pre-Industrial Era (17^th–18^th Centuries) 

During the 17^th and 18^th centuries, the second period of cost accounting began to grow as a reaction to progressively multifaceted industrial activities and commercial actions, notwithstanding the non-appearance of formal systems. The description of the second period of cost accounting will be debated in this section based on important studies in the literature, including, but not limited to (Yamey, 1949; Salomons, 1952; Porter, 1980; Edwards & Bonyns, 1992; Edwards & Anderson, 1995; Williams & Wollongong, 1999).

Salomons (1958) argues, "During the two centuries following the first phase, little evidence of progress in industrial accounting has come down to us." However, Edwards & Bonyns (1992) reported in their study an examination of the accounting records of two sheer combined coal-fired iron-manufacture firms working effectively as companies in the Sheffield zone approximately between the years 1690 and 1783. This encompassed and the implementation of accounting costs to record different costs, complete integration of financial and cost records and determination of unit costs for the sake of raw material inputs. The drive and transformation of goods between diverse sites so as to measure departmental outcomes along with calculating statistics of input-output exclusively for intermediate products and of course raw materials. 

Moreover, tangible progress was also built in cost accounting filed during the mid-18^th centrally. More accurately, in England, critics like James Dodson, in 1750, produced a very clear illustration of a shoemaker's accounts. Dodson has a leather stock account, which is debited with the purchases account by value and quantity (the units of quantity are leather), and credited with the transfers account for shoe soles, heels, and uppers when cut. These accounts are credited with the quantities and values ​​of pieces (pairs of soles, heels, and uppers) sent to the artisans for shoemaking and debited with each artisan's personal account. When finished work is returned, the artisan's account is actually accredited with the agreed worth of the shoes, and this value is debited with the finished shoe stock account, which contains quantity columns to distinguish the main types. The artisans' accounts are balanced, considering minor differences, with a cash discount paid to settle work completed. Finally, the finished stock account is particularly accredited with sales, cash and more importantly the balance is carried indebted to the shameful the unsold stock, thus showing the trading profit. When Hugh Crispin, a Dodson shoemaker, divides his twenty hides into soles and heels, and his hides into uppers and quarters, he obtains lots of different sizes. He adds a different number to each size and arrives at a value for each size.

In the year of 1777, Thompson delivered a primary account of a method named process costing in England. Taking a basic sample of the production of "woollen hosiery" from linen, he shows how the cost of the finished product can be calculated in a series of double-entry accounts, keeping the quantities and values ​​for each operation separately. Thus, the value sequence from the linen stock account to the Seren hosiery (clothing) accounts shows approximately 3.70% per unit. This was tinted when Robert Hamilton devoted a chapter of his ‘Introduction to Merchandise’ to "craftsmen's accounts," i.e., manufacturers' accounts, and offered some wise suggestions on the type of subsidiary books recommended for keeping. Therefore, he suggested the use of a “book of materials, in which purchases and work are pending, and in which materials delivered to workers are entered separately, and the amounts of factory-made goods received in exchange, and the times of return and delivery, and the worth of materials and the value of wages; and the value of mass-produced goods is recorded in distinct columns, and a “wage book, containing the names of the pieces.” He also advised that the book should contain separate accounts for different kinds of expenses, for example “machinery, rents, provisions, etc.” In the last paragraphs of his chapter, Hamilton demonstrates a deep understanding of one of the major problems in process costing.

When someone works in several branches of manufacture, whether on different materials or on the same materials through several successive stages, he must keep his books in such a way as to show the profit or loss in each. 

From Industry to Institution: The Maturation of Cost Accounting (19^th–Mid-20^th Century)

The period from the 19^th to the mid-20^th century witnessed a serious crossroads in the long history of cost accounting, as it developed from a customary of casual manufacturing practices into a a more organised and established regulation moulded by the elements of scientific management, industrialization forces and the very professional accounting bodies. In early 19^th century England [1], both Dodson and Thomson record transactions with persons outside the firm, i.e., with external workers, suppliers, and customers; Hamilton does not, in fact, provide an explanation of a set of manufacturers’ accounts. Thus, there is no doubt that none of these writers had shown how to record the internal flow of values ​​from one process to another within the firm. This, of course, only came about with the development of the factory system in the 19th century. However, there was no justification for F. W. Kronhelm’s assertive claim in the introduction to his book *The Double-Entry Bookkeeping of the Individual* (1) that “retailers and manufacturers have been excluded from the scope of the Italian system." 

However, he is perhaps believing the opinion of his time when he says: "It is fanatical, considering the nature of his business and the many processes through which his goods pass, that a manufacturer is unable to keep his accounts on the same systematic principles as a wholesaler." This certainly indicates that at the beginning of the nineteenth century in England, systematic records of manufacturing transactions were not at all in common use. Unfortunately, although Kronhelm claims that "his new method enables manufacturers to have proof of their books, which until then was considered impractical," his achievement does not live up to its promises. He drew his example of the manufacturer's books of a woollen cloth manufacturer, but the only feature that might distinguish them from the merchant's books is a ledger divided into three sections: one for raw wool, one for work in progress, and one for finished manufacture. This ledger is kept with quantities only. Each section is columnar, and separate columns are kept for different kinds of wool and cloth. 

The section of the ledger dedicated to wool stocks is kept in units of weight, measured by length and width, measured by width, measured by length, and... The "goods" or finished stock section of the warehouse ledger is, of course, kept in number. Cronhelm determines the business's profit or loss monthly in the "goods account," which is in effect a detailed business account recorded daily, debiting the opening stock, procurements, and expenses, and crediting the sales and closing stock. As Williams & Wollongong [5] argues, earlier to 1817, wide-ranging and managerial expenses were apportioned to industrialised costs, and a distinction was made between existing and exploited expenses. Unfinished materials, in the shape of broad-spectrum provisions, labour charges, cloth and cotton for cloth works in procedure, were documented at cost. In fact, Costs were thoroughly collected and moved at real or final cost, rounding up from one single cost centre to another during the numerous phases of production. Porter's [6] study was called The Waltham System. 

Early American Textile Cost Accounting, one of the most important studies focusing on the novel accounting archives of a foremost American manufacturing firm, is among the promptest recognised American and English bids of manufacturing cost accounting. It focused on the ancestors of costing systems, now measured as quite indispensable management tools, that had been in actual usage from the time when the launch of large-scale manufacturing in America. The secretarial records of the Boston Manufacturing Company (BMC), originated in 1813, were selected as a preliminary point. BMC was the earliest of the huge fabric businesses in America, and its abundant managerial and technical inventions and outstanding triumph set a model for the design of the Lowell and Lyman Johnson mills. 

Additionally, before 1817, broad and managerial expenses were assigned to industrial costs, and a distinction was made especially between present and capitalized expenses. Costs were systematically accumulated and transferred at actual or closing cost from one cost centre to another during the various stages of production. Processing processes also appeared. The accounts closed in 1817, which were locked for the material account, are the factory general expenditures account. The inclusion of the money charges is also considered the general account of cloth is the first clue of BMC's efforts to comprise overhead costs over and above direct costs in calculating the cost of cloth trade. Between the years 1816 and 1822, BMC propagated considerably in sales size, organizational construction, and the obligatory level of accounting intricacy. 

From 1818, a current ledger was maintained. In 1820, the idea of ​​cost centres and price transfers became evident within the company. The company constructed its private bleaching facilities, which provided bleaching services for both external clients and the company itself. From the start, it was founded as its individual profit and cost hub. Bleaching was accomplished inside the companies at the regular cost per pound intended for the bleachery. The Boston BMC was the first factory found in England to incorporate bleaching, weaving, spinning, and obviously dyeing below one roof. The Waltham factory converted its fabric manufacture component from a "small spinning mill to an all-purpose factory." This incorporation of the several processes that fashioned ended raw cotton cloth underneath one rooftop reasonably termed for an accounting system proficient of accurately classifying and accumulating costs through the numerous divisions and phases of production. The Waltham system of cost accounting records of the BMC became popular, and its influence grew among other large mills. Mills adopting the Waltham system were estimated to have contributed one-fifth of the nation's cotton fabric production in 1850.

It is remarkable that Porter [6] offered original production explanation records from the year1817, which showcase how numerous certain expenses closely related to cotton—for example insurance, interest and freight—were precisely recorded as nothing but debits in the account of cotton. In this connection, the very costs of labour were similarly listed by grouping in the rotating account. Strikingly, the very labour costs that are thoroughly related with work-in-progress, commencing in 1817, were acutely valued at the backdrop of a usual cost per pound, premeditated according to the regular cost of the preparation of cotton through that very period of time. Likewise, the interlacing account combined earnt costs and documented labour related with work-in-progress operating the similar evaluation process. As the origin and home of the Industrial Revolution, England was unsurprisingly located to be at the forefront of taking the lead in the endeavour of progressing Industrial and manufacturing accounting measures and practices more specifically in the early years of the nineteenth century. However, reading the emerging trends from the Industrial Revolution reveal that this period was a barren period more exclusively when compared to the current of unconventional thought that radiate from France. 

Nevertheless, one English writer from this period, like the early critics on bookkeeping, a prominent mathematician, deserves our attention. He is Charles Babbage, the Lucasian Professor of Mathematics at Cambridge University from the year 1828 to 1839. In two famous passages from his book *On the Economy of Machinery and Manufactures*,1 he raises the question of devoting time and attention to costs, a question which has not been much improved since, and which I can only quote in full.

The severe competition produced by machinery, and the application of the principle of division of labour, make it necessary for every manufacturer to be constantly on the alert to discover improved methods by which the cost of the article he manufactures may be reduced. From this standpoint, it is of the utmost importance to know the exact cost of each operation, as well as the wear and tear caused by machinery. 

The same information is desirable to those who distribute and sell manufactured goods, for it enables them to give reasonable answers or explanations to the objections of questioners and gives them a better opportunity of suggesting to the manufacturer changes in the form of his goods which may suit the tastes or resources of his customers. This knowledge is even more essential to the statesman; for without it, he must have complete confidence in others and cannot form a trustworthy judgment as to the effect of any tax, or the injury which may be done to the manufacturer or the state by its imposition.” [7] The untiring efforts that tinted the purpose of cost accounting in the metallurgic, engineering and ship building industries particularly of western Scotland, the "workshop of the empire," 1900–1960, by dedicating a prodigious pact of academic vigour investigation to measuring the influence of the Industrial Revolution vis-à-vis the improvement of costing practice, directed unswervingly to the usually acknowledged deduction that prompt crtics for example Pollard were erroneous to undertake the premise that a few was accomplished through that period of time. They did, however, achieve large expansions in the very costing practice, exceptionally in the areas of overhead allocation, departmental costing and oftentimes in cost integration around the last span of the 19^th century [5], were the practice of management accounting and price accounting emerged in the factories of Bolton, Soha, and Watts. The implementation of cost accounting methods or systems mainly by management was correspondingly inspected, along with a characterisation of cost accounting as the presentation and collection of cost-based financial information as an assistant to managerial control and of course decision-making. 

At the turn of the twentieth century, Fleming et al. [7] conduct a study namely "Cost Accounting in the Shipbuilding, Engineering, and Metallurgical Industries of the West of Scotland, Empire Workshop, 1900–1960" which demonstrates how cost accounting systems were applied by management. Accordingly, cost accounting includes the systematic assortment and reportage of cost material to help support managers in the task of crafting conversant choices and keeping firm control over and above business processes and operations. The roots of the expansion of budgetary control and standard costing especially in UK are scrutinised from side to side a literature review the field of in accounting history, predominantly those interlocked to Bowens. Overheads ("establishment charges") were allocated by manufacture line as a lump sum, i.e., treated as completely fixed in nature. The board was informed of the real costs per ton of product, incorporating depreciation and overheads. 

In the mid-20^th century, a clear picture of the main cost accounting components emerged at Colvilles by determining the cost of a ship by parts: the hull, the engine, and the boilers. Each and every single component had its individual cost book, into which the costs were entered. Scheduled materials records and direct wages were essentially documented for all containers under production. Each sole month, the sums from these three records were relocated to each container's cost ledger, which contained the cumulative direct cost totals. Significantly, behindhand these fundamental components of the costing system was a full and detailed process of wage analysis ledger, which cautiously divided weekly wage costs by engine, boiler, hull and equally the direct labour costs to be subtracted from the labour category and the overheads, whether they were wage ledger and/or piecework. Ware also had a dedicated production control team in place to estimate costs, comparing the time occupied for work groups and jobs against the time permitted. This was a form of budget control by 1948.

Reflections on the Historical Development of Cost Accounting

This study has sketched the historic progression of cost accounting through three distinctive periods, emphasising the broadminded fine-tuning of cost-related practices in reply to industrial, managerial, and economic developments. The roots and origins of cost accounting date back to the fourteenth century, and not, as Professor Littleton has promoted, the common belief that cost accounting dates to the nineteenth century and developed rapidly in subsequent centuries. Mrs. Rover [3], in her excellent study of the accounting records of the Antwerp printing press, Christopher Plantin, identified the earliest use of accounting in industry as originated from the commencement of the 14^th century in Italy. In this regard, we can seize the seeds and the emergence of the characteristics of cost accounting during this period. 

Edwards et al. [4] argues that the primary explicit growth in cost accounting ensued during the sovereignty of Henry VII of England. As Roover argues, recent studies have exposed industrial accounting in use before even the inauguration of the 14^th century. This fact has been highlighted by research into early Italian account books, such as those of the Del Bene Company, Florentine manufacturers and importers of overseas woollen cloth in the early part of the fourteenth century; Francesco Dattini, a Prati merchant and woollen cloth maker at the end of that century; the Medici, also a woollen cloth maker, during the 15^th and 16^th centuries; and the director of the mint in Ragusa. Competition among small woollen manufacturers who moved from rural towns to cities in the fourteenth century was also one of the main drivers of the need for cost records in the first period to obtain accurate costs and competitive prices.

As for the second phase, contrary to what some have claimed, that we have little evidence of progress in industrial accounting in the eighteenth century, Edwards & Bonyns [8] argues that progress was in fact made in this area. In England, in 1750, James Dodson created a very clear illustration of a shoemaker's accounts. He had an account for the stock of leather, debited from the purchases account by value and quantity (the units of quantity are leather), and credited to the transfer account for the soles, heels, and upper leathers when cut. Added to these accounts were the quantities and values ​​of the pieces (pairs of soles, heels, and upper leathers) sent to the craftsmen for shoemaking and debited from each craftsman's personal account. Thompson, in 1777, also provided a primary account of the process or course of costing in England. Exercising a simplified model of the production of "woollen stockings" from linen, he demonstrated how the cost of the finished product could be calculated.

As for the third stage, as early as 1817, administrative and general expenses were billed to the cost of industrial, what is more a strong distinction was built between capitalized and current expenses. Unfinished materials were inventoried in the form of cotton, cloth, general supplies and even labour charges for cotton works. Fabric was being treated, at cost. Costs were systematically collected and transferred at actual or closing cost from one cost centre to another during the numerous phases of manufacture. Porter [6] presented his study, "The Waltham System and Early American Textile Cost Accounting 1813–1848," one of the most important studies concentrating on the original accounting records of a ground-breaking American manufacturing firm. This signifies one of the promptest recognised usages of industrial cost accounting in both America and England. It focusses on the introductory exercises of costing systems—nowadays regarded as vigorous apparatuses for management—that were formerly found with the rise of significant manufacturing in the United States of America.

Besides, prior to 1817, administrative and general expenses were billed to manufacturing costs, and a distinction was prepared between capitalized and current expenses. In the 1820^s, the idea of ​​cost centres and price transfers within the company became evident. Fleming et al. [7] summarized the extensive efforts that highlighted the  role  of  cost  accounting   in   metallurgical  industries, engineering and the shipbuilding of western Scotland, the "workshop of the empire," 1900–1960, when Cost accounting was demarcated as the presentation and collection of cost-based financial information to support the management of enforcement of control and the very making of decision. The origins of standard costing and budget control in Britain were also investigated, and expenses were allocated by production line as a lump sum, i.e., preserved as entirely fixed in nature. By the mid-20^th century, a clear picture of the principal constituents of cost accounting arisen at Colvilles, with the cost of a ship being determined by its hull, engines, and boilers. 

Every three components had its individual cost book, where the once-a-month costs of direct materials and wages for all vessels in evolution were entered, and the totals from these three records were transported each month to each ship's cost book. Ware also assigned a dedicated production control department to estimate costs, matching the time required for work groups and jobs against the time permitted. This was a form of budget control by 1948.

1. Solomons. Studies in Cost Analysis. 2nd ed., Sweet & Maxwell, 1952.

2. Littleton, A.C. Accounting Evolution to 1900. American Institute Publishing Co., 1933.

3. Roover, D. “Accounting in the 16th Century.” The Accounting Review, vol. 12, no. 3, 1937, pp. 226–237.

4. Edwards, J.R., et al. “Cost Accounting at Keswick, England, c. 1598–1615: The German Connection.” Accounting Historians Journal, vol. 17, no. 1, 1990, pp. 61–80.

5. Williams, R. “Management Accounting Practice and Price Calculation at Boulton and Watt's Soho Foundry: A Late 18th Century Example.” Accounting Historians Journal, vol. 26, no. 2, 1999, pp. 65–66.

6. Porter, D.M. “The Waltham System and Early American Textile Cost Accounting 1813–1848.” The Accounting Historians Journal, 1980, pp. 1–15.

7. Fleming, A.I.M., et al. “Cost Accounting in the Shipbuilding, Engineering and Metals Industries of the West of Scotland, ‘The Workshop of the Empire’, c. 1900–1960.” Accounting and Business Research, vol. 30, no. 3, 2000, pp. 195–211.

8. Edwards, J.R., et al. “British Cost Accounting Development: Continuity and Change.” Accounting Historians Journal, vol. 22, no. 2, 1995, pp. 1–41.