Abstract
From the viewpoint of accounting history, it is one of the great issues when and how systematic depreciation began. At the present time, an influential understanding on this matter might be that of A.C. Littleton, a renowned accounting historian. He maintained that systematic depreciation did not originate until the mid-nineteenth century when railway came up. By contrast, there is a different view that during the Industrial Revolution systematic depreciation already started. In this controversy, it is noteworthy that depreciation must be systematic and regular, not haphazard is assumed. Accordingly, depreciation by the inventory method is excluded from the discussion because it is not planned depreciation.
The author tries to give some evidence to this problem by dint of looking into the accounts of the Cyfarthfa Ironworks which was the largest ironworks in Britain during the early nineteenth century. As a result of analysing these accounts, the following facts were found.
In the Cyfarthfa ironworks, broadly speaking, the straight line method was adopted as a means of writing off “Premises”, from 1819 on. Although the way to write off “Premises” was rather complicated, it is obvious that they used the system so as to recover their invested fixed capital just when the lease contract regarding raw materials would expire. For that purpose, they set the length of 45 years to write off “Premises” in 1819. The process to discover this mechanism was kind of mysterious. In the long run, this fact-finding gives weight to the view that systematic depreciation started before the railway age by offering a fresh exemplification.
