development of American ship-accounting practices to 1900: A comparative study of three vessels, The

Accounting Historians Journal, The, Jun 1999 by Heier, Jan Richard

Abstract: Accounting has always been utilitarian in nature. It adapts to the changes in the business environment by meeting the need for new types of information. The change in waterborne transportation in the U.S. during the 19th century provides an example of such an environmental change that led to a need for accounting adaptation. With the advent of the steamboat, old accounting methods were modified and new ones created to meet the changes in the business environment. In the process, a standardized ship-accounting model was developed. The model can be seen in the accounting records of three ships that sailed at the beginning of the 20th century.

INTRODUCTION

In 1903, the prominent English accounting author, Lawrence Dicksee [1976b, p. 3], wrote: "One of the most ancient (and therefore one of the simplest) modes of transacting business is through the agency of the ship." The early American ship-accounting practices were, for the most part, this simple agency model in which the value of the ship and cargo were combined to act as a separate business transaction for each voyage. The development of new accounting procedures to fit the changing nature of ships and the shipping business in the U.S. shows the adaptive nature of the accounting process as the l9th century progressed.

This need for a new ship-accounting model came with the advent of the steamboat in 1807. Robert Fulton's Clermont showed the world that steam could be used to travel faster on the waterways of the American continent. Faster travel led to changes in the accounting practices of the shipping business. Steamships began to make the aforementioned ship-agency accounting practice obsolete, especially for American riverboat traffic. A ship owner could now make numerous trips with his ship in the same period it took the old sailing ships to complete one tour to some distant shore. The accounting relationship between the business transaction and the ship could now be severed. Ship accounting had to adapt to the changes occurring in the industry. The questions involved in this transition are simple. First, did a "standard" model of accounting develop for American shipping during the 19th century? Second, was the model used by the shipping companies accurately presented in this study?

In an attempt to answer the questions posed above, this paper compares the accounting practices of three ships that sailed and traded at the turn of the 20th century. The first ship studied was a Great Lakes steamer named the Adella Shores. The Shores was part of a family-owned partnership that shipped salt between Michigan and Chicago aboard a small fleet of lake vessels. Next, the records of the riverboat or packet named the Betsy Ann were reviewed. This ship was operated out of Natchez, Mississippi, navigated the lower Mississippi River, and was locally owned by a family corporation with multiple business interests. Finally, the records of the Richard A. Bingham, a schooner that plied the lumber trade in the Caribbean, were studied. The schooner was personally owned by the manager of a lumber company in Pensacola, Florida.

The varied modes of ownership of the three ships mirrored that of the shipping industry in 1903. The book, Workers of the Nation [Willets, 1903, pp. 569-581], said that there were 3,100 steamers, like the Shores, on the Great Lakes at this time. Of this number, only 600 were operated as part of a fleet business. The remainder of the ships were presumably individually owned and operated. Next, at this point in history, there were only about 189 steamers, like the Betsy Ann, left on the Mississippi River. Willets indicated most of these were locally owned and operated. Finally, the fleet of American-flagged, ocean-going schooners, like the Bingham, numbered greater than 16,000 in 1903. Willets did not discuss an ownership mode for these vessels.

As a final note of introduction, the three ships all sailed before the U.S. Interstate Commerce Commission (ICC) issued orders in 1910 to begin an effort to regulate the waterborne traffic in the U.S. Regulations issued by the ICC focused on accounting practices for depreciation and maintenance, as well as balance sheet classifications for waterborne carriers affiliated with railroads [ICC, 1910, 1912]. The fact that these standards did not apply to any of the three ships reviewed for this study allows for a comparison of their records with contemporary ship-accounting practices.

THE SHIPS AND THEIR OWNERS

The Great Lakes Shipper-- The Steamer Adella Shores1: Samuel Neff and Sons Shipping Company, the owner of the steamer Adella Shores, was a family partnership comprised of the father, Captain Samuel Neff, and his two sons, Captain Sidney Neff and Charles Neff. The Milwaukee-based shipping company began operations in the late 1880s when Samuel Neff moved from Oshkosh to Milwaukee. His two sons joined him in the business in the early 1890s. Sidney acted as a ship captain while Charles was responsible for the management of the business in Milwaukee. The Neff fleet of 1900 consisted of three wooden-hulled steamships - the Adella Shores, the Minnie Kelton, and the Edwin Tice. These three ships acted as the core of their small Great Lakes fleet. In addition, the Neffs purchased two barges, the Marion and the O. J. Hale, for the 1900 shipping season. The auxiliary log of the O. J. Hale noted that she had sailed with the Adella Shores between Chicago, Illinois and Manistee, Michigan. The ships were primarily used to transport salt from central Michigan to the port of Chicago for the National Salt Company, the forerunner of the Morton Salt Company. At the turn of the 20th century, salt was an important commodity that was used in a range of products from food preservatives to industrial solvents. The ships in the Neff fleet all had long and storied histories, but only the records of the Adella Shores and the barge O. J. Hale were used for this study.