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Double-Entry Bookkeeping in Early-Twentieth-Century China

Published online by Cambridge University Press:  13 December 2011

Pak K. Auyeung ,
Lei Fu  and
Zhixiang Liu
Pak K. Auyeung
Affiliation:
PAK K. AUYEUNG is senior lecturer at Griffith University in Queensland, Australia.
Lei Fu
Affiliation:
LEI FU is professor of accounting at Capital University of Economics and Business in Beijing.
Zhixiang Liu
Affiliation:
ZHIXIANG LIU is associate professor of accounting at Capital University of Economics and Business in Beijing.
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Abstract

Rare materials recently released by the Zigong City Archives shed light on the accounting system that was created by saltmining businesses in Zigong. The materials include forty-seven accounting books prepared by eight firms in the industry from 1908 to 1930. In this study, the materials are used to reveal how the Zigong salt-mining firms used the double-entry system. The study draws on the archival documents to reveal how the firms' innovative reporting methods enabled them to calculate profit and loss, and it explores the ways in which improved accounting information guided the decisions of Chinese proprietors who were operating in a business environment characterized by inadequate financing, considerable risk, and long intervals between investment and return.

Type
Articles
Information
Business History Review , Volume 79 , Issue 1 , Spring 2005 , pp. 73 - 96
Copyright
Copyright © The President and Fellows of Harvard College 2005

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References

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18 One Chinese foot = 33 centimeters = 1.094 feet.

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27 Some mining firms in Zigong did not keep a daybook. Instead, transactions were recorded directly in the journal and posted periodically in the ledger.

28 China had three kinds of numerals, namely caoma (the commercial form), hanti (the standard form), and kuaiji ti (the accounting form). The accounting form consisted of elaborate characters, which were used when a numeral had to be safeguarded from falsification, and the other two forms consisted of simplified characters.

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31 1 tan = 50 kilograms = 110.23 pounds.

32 Zigong City Archives, ref. no. 45-1-98. The list of partners shows that a partner often held shares in the partnership under a company name. These companies were retailers and bankers in Sichuan Province.

33 Salt Mine Accounting Books in Zigong City Archives, ref. no. 45-1-91.

34 Under accrual-basis accounting, revenue is recognized when a sale takes place, and a purchase is expensed when the acquired benefit is consumed (not as money is received or paid). It thus recognizes the effect of a business event as it occurs and enables expenses incurred to be matched against the revenues earned during the same period in order to compute net profit or net loss.

35 Salt Mine Accounting Books in Zigong City Archives, ref. no. 45-1-86.

36 Zelin, “Capital Accumulation and Investment Strategies in Early Modern China.”

37 Fu Shan was from Tai Yuan, the capital of Shanxi Province in northeast China, where commercial banks flourished during the Ming and Qing dynasties. He was both a merchant and a scholar of philosophy, literature, and medicine.

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39 1 li = 0.5 kilometers = 0.33 miles

40 A “fireball” was a unit of gas. Each fireball was capable of evaporating at least 3.5 tan (1 tan = 50 kilograms = 110.23 pounds) of brine, depending on its strength. In the late Qing, the cost of leasing a fireball was about 5 liang (Chinese currency) per month.

41 Zigong Salt History Archives, A Discussion of Salt History in Sichuan.

42 The cost of woks is discussed in the section entitled “The Double-Entry System.”

43 For example, the price of brine was fixed at 5.76 liang of silver per tan in the late nineteenth century.

44 Salt Mine Accounting Books in the Zigong City Archives, ref. nos. 45-1-93 and 45-1-94.

45 Salt Mine Accounting Books in Zigong City Archives, ref. no. 45-1-86.

46 Zelin, “Capital Accumulation and Investment Strategies in Early Modern China.”

47 Zigong City Archives, An Archival Collection of Salt Mining Agreements.

48 Ibid.

49 Ibid.; Zelin, “Capital Accumulation and Investment Strategies in Early Modern China.”

50 Zigong City Archives, An Archival Collection of Salt Mining Agreements; Furong contracts 68 and 69.

51 Wu, A History of the Sichuan Salt Administration; Zelin, “Capital Accumulation and Investment Strategies in Early Modern China; and Zigong Salt History Archives, A Discussion of Salt History in Sichuan.

52 Zigong City Archives, An Archival Collection of Salt Mining Agreements. The Li and Wang families were active salt miners and landowners in Sichuan during the Qing dynasty.

53 Littleton, Accounting Evolution to 1900.

54 Yamey, “Scientific Bookkeeping.”