Historic records illuminate early accounting practices
by Jason and Mattie McLaughlin Schloetzer ’99
July 1, 2012
Inspired by an Archives & Special Collections exhibit in 2011, authors Mattie McLaughlin Schloetzer '99 and husband Jason returned in March to conduct further research into early accounting practices at Dickinson.
During Alumni Weekend 2011, we returned to Dickinson to see how things have changed and stayed the same. A stroll around campus highlighted the juxtaposition of the school’s rich heritage in buildings, such as Old West and Denny Hall, alongside the growth that has occurred with the renovation of the Waidner-Spahr Library and construction of the Rector Science Complex.
A stop in the library led us to Archives & Special Collections. After viewing the Benjamin Rush & Dickinson College: Building Our Destiny exhibition, which included examples of cash-ledger accounts for the college, we were inspired to view some of the college’s historic ledgers preserved in the archives. How does the growth we see on campus today compare to the experience of the college’s founders? We thought the early ledgers could provide a unique perspective on the growth of the college and, as we later learned, on 17th- and 18th-century accounting practices.
It almost goes without saying that the business transactions required to purchase the materials necessary for building construction in the modern era involve the most basic debits and credits to raw materials and cash. However, Dickinson’s Archives & Special Collections Series 6 Financial Affairs documentation contains financial records and accounting journals from the earliest periods of the college that convey a much different story about the inner workings of business and, more broadly, the economy during the late 1700s and early 1800s. In this age of electronic payments, it feels rather old-fashioned to page through these historic registers. The handwriting is remarkably legible, and we noted instances when the style of writing changed (perhaps indicating a new treasurer) and areas that were scratched out, indicating an effort to correct a mistake in the bookkeeping.
Most people who have lived in a small town are familiar with the notion of “bookkeeping-barter.” For example, the local grocer provides the restaurant owner with groceries each day. The latter is not expected to pay cash immediately, but instead adds the value of the items to his account. Then, when the grocer wants to go out for dinner, he eats at the restaurant. In time, the two sets of sales more or less cancel out, so that the merchants avoided settling their accounts by paying money.
There are several reasons this form of barter formed the basis for much trade in early America, judging from surviving accounting records. First, communities were relatively small and the likelihood that merchant A will both sell to and buy from merchant B was rather high, particularly when both merchants sold a broad array of goods. The ledgers show an interesting example of one such transaction. In 1794, Mr. Robert Davidson wrote a simple note that pledged, against his account with the college, one year of tuition for the son of Mr. William Anderson.
A second reason for the use of bookkeeping-barter was the general scarcity of money, which was often of poor quality. At times, there were restrictions on the ability to make coins, and when coins did circulate they tended to find their way back to Britain and to other trade partners. So, while accounting records during this period, including many of the earliest Series 6 ledgers, were transcribed in pounds, shillings and pence, these were abstract moneys of account, sometimes referred to as “imaginary moneys.”
For example, numerous journal entries are recorded in pounds—even when the transaction is clearly in U.S. dollars—as reflected in the treasurer’s description of the exchange taking place. One Feb. 5, 1803, transaction translates $100 into £37.10, providing an interesting piece of evidence regarding exchange rates at the time. This information is helpful in understanding a contribution from the president of the United States to the college: a March 3, 1803, entry from a tour of Washington, D.C., to raise subscription funds states, “Cash Rec’d from the Presid.t U.S.” of £37.10. Hence, in the year of the Louisiana Purchase, Thomas Jefferson contributed $100 to Dickinson.
Problems also arose due to the lack of uniform exchange rates, and at times there were significant variations in the condition of coin. These variations were induced partly by wear and partly by the propensity of individuals to cheat one another. One could “chip” a coin by shaving, filing or cutting metal from its edges. This is perhaps a reason why many coins today have ribbed edges. A favorite technique was to cut a coin into not quite two halves by shaving a thin strip from the center. One could also “sweat” a coin by chemically leaching out some of its metallic content. The result was a profit for the cheaters and a debased coin for everyone else.
Problems with coins created a climate in which people more readily accepted paper money, since paper money proclaimed its value on its face.
Yet, there were various kinds of paper money based on tobacco in warehouses (Virginia’s “tobacco notes”) or notes distributed by private groups formed to create a “land back” or a “silver bank,” as in Massachusetts. Sometimes a local government might have issued notes with no special backing but with a promise that they would be accepted in payment of taxes.
A review of several accounting entries in the Dickinson files reveals barter transactions for the exchange of dozens of feet of lumber boards in payment for pounds of nails and the exchange of pounds of nails in payment for hours of physical labor. Taken together, such practices reinforced the notion of bookkeeping-barter.
The financial affairs materials managed by Archives & Special Collections provide a glimpse into the important role of bookkeeping-barter and various accounting techniques around the turn of the 19th century. They also provide an inquisitive history, economics or international-studies student with primary documents to study the economic history of Pennsylvania and colonial America while learning about the interesting past of Dickinson College.
Mattie McLaughlin Schloetzer ’99 is a program administrator for internships and fellowships at the National Gallery of Art in Washington, D.C. Jason is an assistant professor of accounting in the McDonough School of Business at Georgetown University.