CIVIL WAR ACCOUNTING PROCEDURES AND THEIR INFLUENCE ON CURRENT COST ACCOUNTING PRACTICES

Transcription

1 King & Case CIVIL WAR ACCOUNTING PROCEDURES AND THEIR INFLUENCE ON CURRENT COST ACCOUNTING PRACTICES Darwin L. King St. Bonaventure University Carl J. Case St. Bonaventure University ABSTRACT: This paper reviews the importance of early military accounting requirements as they have shaped current cost accounting methodology. Some of the most important improvements in accounting and recordkeeping practices of the nineteenth century originated as a result of the educational philosophy of the United States Military Academy at West Point and the U.S. National Armory at Springfield. INTRODUCTION This article begins with a brief review of the development of cost or managerial accounting principles in the United States. It continues with a discussion of the cost related reporting requirements of accounting clerks and quartermasters during the Civil War. These individuals utilized a comprehensive cost accounting system in order to manage the huge expenditures of both men and materials during the Civil War. A large percentage of the managerial or cost accounting practices utilized by the Union Army have proved to be beneficial to modern day business firms. The theme of this paper is that historical accounting practices and procedures have had a profound effect on our existing accounting system. The appendix of this paper includes examples of cost accounting regulations and reports of the period. EARLY COST ACCOUNTING PRACTICES Early accounting texts published in the United States in the 1700 s included the use of double entry accounting principles originally published by Pacioli in his Summa of Some of the first English works by Oldcastle (1543), Peele (1553), and Weddington (1567) were either direct or indirect translations of Pacioli s work (Previts & Merino, 1998). These publications were enhanced and distributed in the early 1700 s and used by some of the most influential Americans. In particular, Scotland s John Mair published the text Bookkeeping Methodiz d in 1736 (Mair, 1736). George Washington used Mair s text in the creation of his plantation expense account reports (Palmer, 1976). According to John Palmer, Washington had significant problems maintaining cost records as he often used a balancing entry for unaccounted funds. In effect he used a plugged number to balance the debits and credits in his books. For example, in his December 31, 1769 balancing entry, Washington recorded an entry of over one hundred forty-three thousand pounds for cash lost, stolen, or paid away without charging (Ibid). It is evident that effective techniques of cost identification and accumulation did not exist at this time in the United States. It was only after 1800 that a basic knowledge of cost identification and accumulation was developed. During this period, industrial cost accounting contained significant flaws including the failure of 41

2 ASBBS E-Journal, Volume 3, No. 1, 2007 manufacturing costs to flow through to the general ledger accounts, no significant integration of cost data with financial reporting, and the lack of use of cost data for cost control (Fleischman & Parker, 1990). Significant changes in cost accounting began to appear after According to A.S. Eichner, the typical service or manufacturing business prior to 1840 was very little changed from those of Pacioli s fifteenth century Venice (Eichner, 1978). There were a number of private sector industries during this period that began to develop more sophisticated cost accounting systems. They included most Massachusetts ice trade firms, some southern logging businesses, and certain paper and textile mills (Previts & Merino, 1998). In the government sector, both the Springfield Armory and West Point used what was considered to be the most sophisticated cost accounting system that existed at this time (Hoskin & Macve, 1988). Both prior to and after the Civil War, West Point graduates took leading managerial roles in both the public and private sectors. These men were taught the most sophisticated cost identification and analysis methods of the time. Many of the cost accounting principles in use today were developed by United States military entities. West Point, in particular, has influenced America s history since the early 1800 s. According to its website, the United States Military Academy (USMA) was established by an Act of Congress on March 16, 1802 ( Sylvanus Thayer, USMA Class of 1808, served as its Superintendent from 1817 to He was recognized for significantly upgrading academic standards, instilling military discipline, and emphasizing honorable and ethical conduct of both students and faculty. His influence affected such notable graduates as Jefferson Davis (1828), Robert E. Lee (1829), and George G. Meade (1835). Thayer emphasized the importance of high academic standards while maintaining rigid ethical principles. Since many USMA graduates entered the business world following the Civil War, Thayer s graduates applied the principles of ethical behavior and high standards in their work life. One area that was emphasized in the educational program of the USMA was efficient and effective recordkeeping. These principles were utilized in the development of the Regulations for the Army of the United States. This text served as the operations and recordkeeping manual for the Union Army during the Civil War (War Department, 1861). MILITARY ACCOUNTING REGULATIONS DURING THE CIVIL WAR Graduates of the USMA were instrumental in the production of various military operations manuals of the period. Military cost accounting procedures were improved significantly with the introduction of three important texts published between 1861 and First, the official Revised Regulations of the Army of the United States 1861 provided complete information on procedure and protocol, organizational structure, court martial s, and all reports required in order to maintain proper documentation of both human and physical resources (War Department, 1861). This text of nearly 600 pages provided detailed instructions concerning the reports that were required on a quarterly, monthly, weekly, and daily basis. It served as the main textbook for required accounting practice and adequate reporting. In particular, the revised Army Regulations of 1861 provided accounting clerks and quartermasters with an effective and efficient system of cost accounting. The second important cost accounting text was titled The Company Clerk (Kautz, 1865). In a circular issued to all company officers on June 28, 1863, this text was recommended for all officers in the volunteer service to acquaint themselves with its very valuable and necessary information (Ibid). Finally, the third text titled The Quartermaster s Guide was published in 1865 and included full instructions for preparing all reports and returns (Case, 1865). Since the Quartermaster s department was responsible for all men and materials, this updated text included all regulations issued in the

3 King & Case edition as well as updates and changes introduced from May 1, 1861 to April 10, These texts related to both the smaller military units (companies) as well as larger combined units (regiments) as discussed below. CLERKS AND QUARTERMASTERS MILITARY COST ACCOUNTANTS A brief review of military organization will provide the reader with more insight into the two basic military cost accounting positions: the Company Accounting Clerk and the Regimental Quartermaster. The Civil War Union Army was organized into corps, divisions, brigades, regiments, and companies (Boatner, 1991). A corps was the largest military unit. It was made up of two or three divisions under the direction of a Major General. A division was composed of three to five brigades. Each division was led by a Major General or Senior Brigade General. A brigade consists of three to six regiments. Either a Brigadier General or a senior Colonel commands it. A regiment was typically composed of 500 to 1,000 men. The commanding officer of the regiment is normally a Colonel. When the Civil War began, a regiment was at full strength with about 1,000 men. Finally, the regiment was broken down into the military's smallest record keeping unit called a company. Record keeping in the U.S. Army began, at its most basic level, with the company clerk (Kautz, 1865). The company or accounting clerk was a position filled by a man who was either a non-commissioned officer or soldier who was known to have good penmanship and a capacity for keeping good reports and records. This basically meant that privates (soldiers), corporals, or sergeants (non-commissioned officers) were allowed to hold the position of company clerk. Either the commanding officer of the company (i.e. captain) or the first sergeant normally supervised the clerk. The company clerk did not receive any extra pay for the job but was excused from most other duties. The Company Accounting Clerk represented the heart of cost control for the army during the Civil War. The next level of cost accounting was at the regimental level. Each quartermaster was responsible for cost records relating to the ten or twelve companies comprising the regiment. Since the quartermasters handled a large amount of cash for making payrolls and purchasing required supplies, regulations required all newly appointed quartermasters to purchase a good and sufficient bond in an amount specified by the Secretary of War (Case, 11). Normally, a ten thousand dollar bond was required for Assistant Quartermasters and substantially more for a Quartermaster (Ibid). Similar to current business practice, effective internal controls require the bonding of personnel who handle significant amounts of cash. The Quartermaster s Guide specified that the collateral pledged by the soldier to get the bond must be worth at least double the amount of the bond (Ibid). Returning to the Accounting Clerk s position, he was required to maintain adequate records and reports for the company. Similar to the use of a special journal system today, the clerk kept records using a number of recording devices. The clerk was required to maintain current records in nine separate books. The Morning Report Book, Sick Book, Rosters, Descriptive Book, Clothing Book, Order Book, Account Book of Company Fund, Register of Articles Issued to Soldiers, and Record Book of Target Practice were all the responsibility of the company clerk (Kautz, Clerk, 1865). In order to maintain effective costs accounting system, a significant number of journals and records were employed. Each of these books documented the cost behavior of either men or materials. The Morning Report Book was prepared and sent to the regimental adjutant s office after sick call but no later than 8 am daily. The book contained the duty status of each soldier in the company. It included a Remarks column that described the reason for every officer or soldier not being available for duty. This document also described the situation of any soldier on special or extra duty. Extra duty was a situation where soldiers were assigned to some continuous labor, in addition to their normal duties, for a period of ten days or longer (Kautz, Customs, 43). The most typical situations included employment in the 43

4 ASBBS E-Journal, Volume 3, No. 1, 2007 Quartermaster s department as mechanics, laborers, or teamsters. The Morning Report Book, in addition to listing the men available for duty, also listed any soldier who was under arrest, away with or without leave, killed in action, wounded, hospitalized, or sick. The Regimental Surgeon had sole responsibility of excusing soldiers from duty due to illness. The company s officers did have the power to excuse men from duty when they were assigned to jobs such as company clerk, company tailor, or company blacksmith (Kautz, Clerk, 13). The Sick Book was updated every morning reporting the names of all ill soldiers. It included a statement by the surgeon as to whether they were excused from active duty or available for duty. For duty meant that the man was fit and able to perform all of the typical duties of a soldier including guard duty, drills, parades, and detached service (Kautz, Clerk, 15). Detached service was a situation where soldiers were sent away from their companies to perform duties at another post, camp, or garrison (Kautz, Customs, 43). The Roster Book was prepared using one page per month. It showed the names of each man in the company down the left of the page and each day of the month running across the top from left to right. This book recorded three classes of duty including guard, detachments, and fatigue. Normally, a separate Roster was maintained for each duty class (Kautz, Clerk, 17). Fatigue was a term applied to all duties not strictly military which included laboring making roads, foraging for supplies and materials, and working on improving the grounds near a camp or post (Kautz, Customs, 40). The Descriptive Book listed each non-commissioned officer and enlisted man of the company with numerous details pertaining to each man (Kautz, Clerk, 31). For example, the book included age, height, complexion, eye and hair color, birthplace, occupation, and when, where, and for how long they enlisted. In addition, other information including character, promotions, appointments, compliments, and medals earned was included. Negative aspects of the soldier including punishments resulting from court-martials were also included. This book was intended to list every important item to the credit or discredit of a soldier, to enable officers succeeding to the company to have a correct history of the men (Ibid.). The company Clothing Book was prepared by the clerk in an effort to maintain records of clothing issued to each non-commissioned officer and private (Kautz, Clerk, 17). Army Regulations clearly state the amount of clothing allowance for each soldier on a yearly basis. For example, a private in the infantry received a clothing allowance of $52.03 the first year, $30.12 the second, $42.96 the third, $30.12 the fourth, and $39.62 for the fifth year of enlistment (Kautz, Clerk, 21). This allowance represented a total of $ for a private who served for five years. The Clothing Book was intended to accurately record all clothing requested by a soldier with a resulting figure for either clothing allowance still owed to the soldier or over-issues which resulted in a debt to the army. These extra issues were payable by the soldier at the payroll musters which were conducted every two months (Kautz, Clerk, 22). One page of the Clothing Book was dedicated to a single soldier. The army normally provided the men with their entire first year s clothing allowance upon enlistment. In following years, the clerk used a monthly allowance to determine if an overdrawn or under drawn situation existed. Clothing recordkeeping alone required a substantial amount of the clerk s time and used numerous standard costs. The army also attempted to safeguard clothing by carefully reviewing any soldier developing a disability soon after enlistment. If the problem was legitimate, the soldier was allowed to leave the army and keep the clothing with no deduction from their final paycheck (Kautz, Company, 23). However, if the man was found to be of unworthy character and attempting to defraud the army, the full clothing allowance was withheld from his final paycheck. This early code of ethics was utilized by the military in an effort to reduce fraudulent asset losses. Ethical behavior was as important during the Civil Was as it is today. 44

5 King & Case Another problem facing the company clerk was soldiers who were careless and improvident and sold their clothing to raise extra money. This occurred in areas of the country where clothing was much in demand (Kautz, Clerk, 24). At times, clerks requested soldiers to produce their clothing for inspection or account for its absence prior to the issuance of additional items. The army utilized many internal controls such as these surprise clothing audits in order to safeguard each and every asset. The Order Book maintained by the clerk included all general orders from the regimental headquarters (Ibid). This document also included any special orders that pertained to the company in general or to a particular member of the unit. The Company Fund Account Book was a cash fund utilized by the unit for the purchase of necessities that were not furnished by the army (Kautz, Clerk, 25). It basically took the form of a sources and uses of cash statement. On the left side, the sources of company funds were recorded. This debit side normally began with the fund s beginning balance and listed the sources of cash including amounts received from either the regiment or company savings account. The company fund also increased with the sale of unused company rations, allocations of post or regimental funds, and the sale of surplus vegetables raised in a company garden when stationed in a single location. The right or credit side of the Company Fund listed all the uses of cash such as the purchase of spices for cooking. The Return of Company Fund was prepared every four months and reconciled the amount of cash that should have existed at the end of each accounting period. It was prepared by the company clerk and signed and approved by the commanding officer. At the regimental level, all reports received from the company clerks were summarized and reviewed for accuracy prior to sending the information to Washington. The Register of Public Property Issued to Soldiers was another book prepared by the accounting clerk (Kautz, Clerk, 27). Its purpose was to record all of the rifles, pistols, swords, and other arms issued to each man. These assets were carefully assigned to each soldier in an effort to safeguard critical resources. The book also contained information on the issuance of cap-boxes, cartridge-boxes, gun slings, waist belts, and small tools used to maintain the weapons. Soldiers were normally charged for lost arms unless there was a very legitimate reason. Also, any stolen weapon was charged to the soldier unless he could show that he took adequate steps to safeguard it. Following a military engagement, the officers of the company were required to inventory arms in the hands of surviving soldiers and collect weapons from soldiers who were either killed or wounded (Kautz, Clerk, 30). The final book maintained by the company accounting clerk is the Record Book of Target Practice. This book, furnished by the Regimental Quartermaster, was used for recording the rifle shooting abilities of each man in the company (Kautz, Clerk, 32). Each man fired four rounds at distances from 150 to 400 yards. Soldiers with the best accuracy received a company prize, which was a brass medal indicating sharpshooter ability. This book had to be forwarded to the commanding officer of the regiment weekly. These nine books required a tremendous amount of the clerk s time. In addition to the primary books listed above, the company accounting clerk was also responsible for the preparation of the following documents at the time periods indicated. Additional Company Clerk Reports, Returns, Rolls, And Papers: 1. Daily- List of Sick (Sick Book) Morning Report (Morning Report Book) Details of Men (For Guards, Detachments, et.) 2. Monthly- Monthly Return (Summary of Men and Equipment) 45

6 ASBBS E-Journal, Volume 3, No. 1, Bi-Monthly- (Due end of Feb, April, June, Aug, Oct, Dec) Muster Rolls (Payroll reports) 4. Quarterly- (Due end of March, June, Sept, Dec) Return of Clothing, Camp And Garrison Equipage Return of Ordnance And Ordnance Stores (Including All Weapons, Ammunition, Supplies, et.) Return of Quartermaster s Property Return of Deceased Soldiers Descriptive List of Men Joined Return of Blanks 5. Annually- Annual Return of Casualties This list provides insight into the extent of cost related accounting work required from each clerk. Muster Rolls were normally prepared every two months in an effort to pay the soldiers on a regular basis. The accounting clerk even had to complete records for paying the company laundresses. Four women were allowed to serve each company as washerwomen (Regulations, 24). The Army s Council of Administration prescribed the price for washing all items of soldier s clothing. The clerk maintained a record of debts owed by the soldiers to each laundress as they completed their weekly washing duties. The washerwomen were compensated at the pay-table on a bi-monthly basis when a muster roll was conducted. Detailed accounts receivable records were updated over the two-month period to ensure that these women received proper compensation. REQUIRED COST ACCOUNTING PROCEDURES The next portion of this paper reviews a number of the cost accounting requirements of Company Clerks and Regimental Quartermasters. Following the instructions found in the three military texts listed above, these men were able to effectively and efficiently identity and summarize various costs of men and materials. The Regulations of 1861 provides most of the material covered in the following portion of this article. Article XLII of the regulations deals with the Quartermaster s Department and cost identification and accumulation procedures required of all clerks and quartermasters. Article XLII defines the Quartermaster s Department as the unit that provides the quarters and transportation of the army, storage and transportation of all army supplies, army clothing, camp and garrison equipage, cavalry and artillery horses, fuel, forage, straw, material for bedding, and stationery. Indeed, the clerks and quartermasters were confronted with numerous cost identification and accumulation problems on a daily basis. The Regulations of 1861 included a significant amount of standard costing information. The U.S. Army during the Civil War utilized a significant number of standard costs in an effort to safeguard all assets and prevent waste. First, the regulations specified a standard amount of barracks and fuel for all officers. For example, Section 1068 of the regulations specifies that a Major-General was allowed a five room quarters, one kitchen, and five cords of wood per month from October 1 to April 30. Standard costs were also provided in the regulations for the amount of stationery available for all officers. For example, Section 1130 states that an officer commanding a regiment of not less than five companies was allowed a quarterly allotment of ten quires (500 pages) of writing paper, one quire of envelopes, forty quill pens, six ounces of sealing wax, and two rolls of office tape. Printed books for the recording of all costs were distributed to clerks and quartermasters upon a timely requisition. In most cases, any clerk or quartermaster requiring more than these allotments were charged for the additional items. Camp and garrison equipage were also distributed using a standard allotment system. For example, Section 1148 allows a general three tents, one axe, and one hatchet while in the field. Also, for every 46

7 King & Case fifteen soldiers on foot and every thirteen mounted soldiers, there was allocated one tent, two spades, two axes, two picks, two hatchets, two camp kettles, and five mess pans. This standard allowance of equipment was sent by the Quartermaster-General to the officers stationed with the troops. If the unit abused their allotment of equipment, any additional items requested over the standard allowance were billed to the requesting company or regiment. The subsistence department provided standard cost information on expenditures for the preparation of meals for the men. Notes to Section 1229 of the regulations quote the cost of 100 rations for the soldiers at $ This figure represented detailed cost figures on pork, beef, flour, beans, rice, coffee, tea, sugar, vinegar, candles, soap, and salt. For example, 68 rations of pork were 51 pounds of meat at a standard cost of six cents per pound. The other 32 rations (to make the 100 rations total) was 40 pounds of beef at four cents per pound. The cost of the pork ($3.06) and beef ($1.60) represented a significant portion of the total cost of the rations of $ Feeding all of the soldiers three times daily was a significant expense whose cost was carefully regulated by army headquarters. Regulations also included details on the allowed quantities of medicines and equipment for both general and post hospitals. Pages 292 to 309 contain the list of every medicine required to be in the inventory of a hospital. The standard quantities allowed were based on the number of men in the post. For example, a post with 500 men was allowed a yearly allotment of 96 bottles of alcohol. This was increased to 192 bottles per year if the post had 1,000 men. This standard allowance table, in addition to medicines, included the yearly allotment of instruments (stethoscopes, syringes, splints, etc.), books, hospital stores, bedding, dressings and related supplies. If a post required additional items, they paid a standard cost for each product ordered over the yearly allotment. Clothing was another asset where cost accounting principles were extensively employed. Soldiers were allowed, according to Section 1050 of the Regulations of 1861, a certain number of articles of clothing over a five year period. For example, the soldiers were allowed seven caps, five hats, eight coats, thirteen trousers, fifteen shirts, twenty pairs of socks, and ten pairs of boots over a five year enlistment term. The standard cost of each item of clothing is shown in the second exhibit of the appendix. Cost accounting was extremely important in determining whether the soldier owed the army for extra clothing drawn or the army owed the soldier for items not drawn. Other areas that utilized cost accounting principles included the payroll department, small arms and munitions, and the budget requirements of clerks and quartermasters. The pay department utilized standard costs by rank as discussed later in this paper. The first exhibit in the appendix shows the standard costing system used to determine soldiers and officers pay, number of rations allowed per day to officers, and the number of horses and forage (horse food) allowed to officers in both times of peace and war. The regulations also stipulate the cost of each individual part of a rifle or pistol to properly charge soldiers for repairs to small arms that were not properly cared for while in their possession. Finally, a number of large budgets were required of both clerks and quartermasters in order to properly plan for future cash expenditures. Cost accounting principles were exceptionally visible in the budgeting process of the army. Both clerks and quartermasters were required to prepare budgets that were called Estimate of Funds Required (Regulations, 449). These quarterly budgets used standard cost information to determine the funds needed by a company or regiment for muster (payroll), food and rations, ordnance service (including police and preservation of the post and tools and machinery), supplies, and all other materials required by the unit. These budgets were prepared in triplicate to provide copies for the preparer, regional headquarters, and army headquarters in Washington. These early cost accountants attempted to provide an adequate audit trail so that all cost information could be traced from its origin to final reports received in Washington. The authors have reviewed only a small portion of the cost accounting principles practiced by the clerks and quartermasters. These highly efficient and effective practices were the result of the high quality 47

8 ASBBS E-Journal, Volume 3, No. 1, 2007 training received by the officers while at West Point. Since many of these officers entered the business world following the war, these policies were commonplace in the rapidly developing corporate business environment of the late 1800 s. The final portion of this paper reviews examples of cost accounting records found in the Regulations of 1861 and actual Civil War reports from the authors collections. EXAMPLES OF CIVIL WAR COST ACCOUNTING RECORDS The appendix contains three cost accounting report examples. Two are from the Regulations of 1861 and one is an actual Civil War era reports that illustrate the dependence of the U.S. Army on accurate cost control and measurement. They show significant cost areas such as payroll, clothing allowances, and travel expenses. Accurate record keeping and cost control by the Union Army provided it with a significant advantage over the Confederacy during the war. Battles could only be won if proper amounts of men and materials were available where and when they were needed. The first report in the appendix reflects the standard cost system used by the Army in calculating the soldier's payroll (Regulations, ). The first page of the appendix shows a list of the officer's pay per month, number of rations per day for subsistence, forage allowed for the horses maintained, and the number of servants allowed. The officers who were allowed extra rations per day used these to feed their servants. It is interesting to note that in most situations the rations allowed per day would not provide three meals for the officer and each of the servants. The standard pay per month for combatants varied tremendously from a high of $270 for Lieutenant Generals to $13 for a private. Noncombatant musicians received a salary of $12 per month. The Corporals wage of $20 per month and the Sergeants pay of $34 monthly explain the constant desire of soldiers to work for a promotion. They could nearly double their monthly pay with a single advancement in rank. The troops were to be paid "in such a manner that arrears shall at no time exceed two months" (Regulations, 341). This two month maximum time period was very typical during the war. This forced the soldier to stay on a budget knowing that the next payday was not for eight weeks. An estimate of total payroll for the next two months in the form of an expected wage budget was also required of each accounting clerk (Regulations, 345). This was sent to the office of the Paymaster General in order to better estimate future payroll costs. The accounting and record keeping positions in the army received an excellent wage when compared to the typical soldier. For example, the typical quartermaster earned $80 per month. These men controlled and safeguarded inventory and also prepared a variety of related reports. The paymaster of a regiment also received an $80 salary per month. This was about six times the amount received by a typical private. These previously mentioned salaries were particularly large when compared to other individuals who provided very essential services. For example, female nurses who fought to keep the men alive following a battle were paid 40 cents per day ($12 month) and received only one meal ration per day (Regulations, 353). Also, surgeons for the first ten years of military service received the same $80 monthly salary of the paymaster and quartermaster (Regulations, 349). Finally, the majority of professors at the military academy received wages of only $70 per month (Ibid.). Report 2 in the appendix is the reference form used in the determination of whether a soldier was over or under spent in his clothing allowance (Kautz, 18-21). The second report in the appendix was the reference guide used in this costing process. For example, hats cost about $1.65, coats were between $5.30-$7.30, and trousers ranged from $2.50-$3.75. A woolen blanket's standard price was $3.25 while a pair of flannel drawers cost 90 cents. When a soldier was issued clothing, his personal account was charged for the cost listed in this table. 48

9 King & Case Regular military personnel received a clothing allowance as shown in the second part of Report 2. For example, a corporal in the cavalry received a clothing allowance of $55.38 in his first year of service. This dropped to only $31.07 in the second year. The total clothing allowance for a five-year enlistment in the Army was approximately $200. The figures in this table were based on the assumption that some articles of clothing would not have to be replaced each year. For example, two caps and coats were allowed the first year of service but only one each the second year (Regulations, 170). The Army allowed the soldiers an equal number of the more basic types of clothing each year such as four pair of stockings and three flannel shirts. Volunteers accounted for the majority of the total membership of the Union Army during the Civil War. The troops who were volunteers vs. regular military (draft) received a monthly clothing allowance. This figure was fixed by law at a generous $3.50 per month or $42.00 per year (Kautz, 21). Each soldier s account was compiled to compare clothing drawn with the appropriate clothing allowance based on time served. When a soldier left military service, the personal account showed either due the U.S. for clothing overdrawn or due the soldier for clothing not drawn (Kautz, 22-23). In this final statement, the calculation of the net amount due or owed by the soldier was determined. This process was completed in order to insure that only the standard allowance for clothing was received by soldiers based on their area of service and rank. Clothing had to be limited to a standard amount each year in order to discourage soldiers from selling items, keeping the cash, and later requesting additional clothing. The Army imposed fines of up to $300 on soldiers who sold their clothing and civilians who bought these items based upon the Act of January 11, 1812 (Kautz, 24). Clothing inventories were performed on a regular basis, which required the soldiers to "produce their clothing and account for its absence"(ibid.). The cost accounting practices for clothing and uniforms were among the most detailed and specific in the U.S. Army Regulations. The final document (Appendix Report 4) shows the payment of travel expenses to an officer. Similar to benefits that business executives receive today, the officers in the Union Army were paid a mileage allowance for travel to the camp where they were to be assigned (Regulations, 344). Capt. David M. Meredith traveled from Columbus, Ohio to a Union camp located near Manchester, Tennessee. It was typical to reimburse officers, but not enlisted men, for travel from their hometown to the place of their assignment. In this situation, Meredith's travel was 540 miles for which a six cent a mile reimbursement was paid to the Captain. The Regulations also mention that the number of miles should be based on the "shortest mail route or by the shortest practical route if no mail route exists" (Ibid). This represented an additional control over total operating costs. Similar to currently employed cost accounting techniques, the Union Army during the Civil War attempted to scrutinize all costs and keep abuse from occurring. Accounting procedures employed at this early date attempted to install an efficient system of internal controls to safeguard cash. The bottom of the document is a receipt for the funds received by Capt. Meredith. The Quartermaster, A. J. MacKay, paid him for his travel on July 20. Notice the statement on the bottom, which reads that he, "had not been furnished with public transportation, nor received money in lieu thereof, for any part of the route." The Army was very careful not to allow the men to "double dip" expenses. SUMMARY This paper has reviewed the importance of cost accounting principles and practices during the Civil War. The typical accountant of today may not be aware of the number of costing methods that were developed during the Civil War period. Since the war was such an expensive operation, the Federal Government realized the importance of cost identification, accumulation, and reporting. The purpose of this paper was to communicate the fact that many of the cost accounting procedures in use today owe their existence to 49

10 ASBBS E-Journal, Volume 3, No. 1, 2007 Civil War military recordkeeping. The Union Army realized that the war could not be won without proper records relating to both men and materials. The three military manuals published in the 1860 s clearly show the importance of cost accounting practices. The regulations as well as the instruction books for both clerks and quartermasters list the numerous reports that were required to properly account for all expenditures. Clerk and quartermaster budgets and monthly reports normally involved the two most critical assets needed to win the war. The examples included in the appendix show the payment of wages to officers and soldiers (the men) as well as the cost of all supplies (materials) especially clothing. Both company clerks and quartermasters were required to prepare accurate, complete, and timely reports in an effort to safeguard all assets and minimize expenses. Cost accounting principles have evolved significantly since the 1860 s. The Civil War era, however, provided the accounting profession with substantial improvements in cost identification, classification, and reporting. The Union Army recordkeepers, given their West Point influenced reporting requirements, did an outstanding job in this vital process. The clerks and quartermasters provided Washington with an efficient and effective system of cost reporting that provided a significant advantage to the Union Army. Without these dedicated cost accountants and their advanced cost reporting system, the war would have likely continued for a much longer period or may have even resulted in a different outcome. Modern cost accountants owe much to the innovative clerks and quartermasters of the Civil War period. REFERENCES - The United States Military Academy Website Boatner, M.M The Civil War Dictionary, New York, NY: Vintage Books. Case, Theo.S The Quartermaster's Guide, Saint Louis, MO: P.M. Pinkard Co. Eichner, A.S Review of The Invisible Hand: The Managerial Revolution in American Business, by Alfred Chandler. Business History Review. Spring. pp Fleischman, R.K. & Parker, L.D British Entrepreneurs and Industrial Revolution Cost Management: A Study of Innovation. Unpublished Manuscript. Hoskin K. & Macve R The Genesis of Accountability: Springfield, Tyler, and West Point. Collected Papers of the Fifth World Congress of Accounting Historians. University of Sydney Press. Kautz, A.V The Company Clerk. Philadelphia, PA: J.B. Lippincott & Co. Kautz, A.V The 1865 Customs of Service for Non-commissioned Officers and Soldiers. Philadelphia, PA.: Lippincott & Co. Mair, John (1763). Book-keeping Methodiz d. Edinburgh, Scotland: Sands, Murray and Cochran. Palmer, John R. (1976) The Revolution Was Not in Accounting, Tempo, Vol. 22, pp

11 King & Case Previts, Gary J. & Merino Barbara D A History of Accountancy in the United States, Ohio State University Press. U.S. War Department (1861). Revised Regulations for the Army of the United States 1861, Philadelphia, PA: JGL Brown, Printer. 51

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