A C T A U N I V E R S I T A T I S L O D Z I E N S I S. Mikołaj Turzyński - PDF

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C T U N I V E R S I T T I S L D Z I E N S I S FLI ECNMIC 257, 2011 Mikołaj Turzyński PERFRMNCE MESUREMENT IN JULIUSZ U S THERY F GRICULTURL CCUNTING IN 19 th CENTURY PLND bstract. Before the Partitions,

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C T U N I V E R S I T T I S L D Z I E N S I S FLI ECNMIC 257, 2011 Mikołaj Turzyński PERFRMNCE MESUREMENT IN JULIUSZ U S THERY F GRICULTURL CCUNTING IN 19 th CENTURY PLND bstract. Before the Partitions, Poland, beside Russia, was the largest, territorially compact European state. s a result of the Partitions of Poland, which were carried out in 1772, 1793 and 1795, Polish territory was divided and annexed by the three partitioning powers: Russia, Germany and Prussia. In an attempt to resist aggressive Germanization by the invader, Poles employed, among others, the methods of organic work and work at the grass roots (a programme, launched by the Polish positivists, of economic and cultural development through spreading literacy and popularizing science among the masses). It was on Polish territories under Prussian occupation that the theoretical and practical foundations of farm accounting were developed (Bernacki 2007b, p ). The main objectives of this paper are: to place the work and theory of Juliusz u within the social and political context of the Prussian partition; to present a theory of agricultural accounting developed by J. u; to evaluate J. u s theory from present-day perspective. J. u is the author of a comprehensive, universal theory of accounting encompassing its three cognitive levels (aspects): (1) general level, covering the concept, objectives and method of accounting; (2) procedural level, comprising principles of assets measurement, choice of accounting period and production cost calculation; (3) supporting level, comprising organization of accounting, rules for statistical data collection and audit procedures. Keywords: accounting history, 19 th century Poland, accounting theory, agriculture. It is in accounting theory, more than anywhere else, that the need exists to clarify the simplest matters that were made complicated by pseudo-scientists. J. u, INTRDUCTIN Before the Partitions, Poland, beside Russia, was the largest, territorially compact European state. In the 18 th century, Poland suffered from deep social and political crisis, which was an indirect cause of the Partitions. ther impor- ccounting Departament, Faculty of Management, University of Łódź. General thesis of earlier versions of this paper were presented at the 34 th nnual Congress of the European ccounting ssociation from pril 2011 in Rome, Italy. [175] 176 Mikołaj Turzyński tant factors which led to Poland s temporary disappearance from the map of Europe included aggressive policy of the neighboring countries and economic attractiveness of Polish lands (Korobowicz, Witkowski, 2009, p ). s a result of the Partitions of Poland, which were carried out in 1772, 1793 and 1795, Polish territory was divided and annexed by the three partitioning powers: Russia, Germany and Prussia. The Prussian partition comprised three provinces: West Prussia with the city of Toruń, South Prussia: Poznańskie, Kaliskie and part of Mazovia with Warsaw, and New East Prussia: territories north of the Bug and Vistula rivers (Zdrada, 2005, p ). In an attempt to resist aggressive Germanization by the invader, Poles employed, among others, the methods of organic work and work at the grass roots (a programme, launched by the Polish positivists, of economic and cultural development through spreading literacy and popularizing science among the masses). It was on Polish territories under Prussian occupation that the theoretical and practical foundations of farm accounting were developed (Bernacki 2007b, p ). The main objectives of this paper are: to place the work and theory of Juliusz u within the social and political context of the Prussian partition; to present a theory of agricultural accounting developed by J. u, with a particular focus on the social and financial context of performance measurement; to evaluate J. u s theory from present-day perspective. The author s theses are as follows: the spreading of agricultural accounting knowledge in the Prussian partition was an element of the grass-roots work ; the banning of agricultural accounting education by Prussian authorities was an element of Kulturkampf; the main ideas of J. u s theory are present in current accounting regulations (ccounting ct, FDN system, IS 41 griculture). s far as the author of this paper knows, J. u s conception of agricultural accounting has not been the subject of detailed studies published in accounting literature in the post-war period. Its importance, however, was pointed out by S. Moszczeński (1947, p ), who was the first to refer to it as theory and to emphasize J. u s scientific approach to accounting for agricultural activity. J. u s social, professional and scientific achievements were also recognized by. Bernacki, who referred to his contribution in many of his publications (Bernacki, 2007a, b). ccounting history has a long tradition, but in recent years it has concentrated its endeavours to expand research enquiries and methodological approaches. It seeks to understand accounting s past by investigating the development of accounting through the consideration of its international dimensions and in light of a wide range of contemporary social and political theories and aspects (see Napier, 1989, p ; 2006, p ; Carnegie, Performance measurement in Juliusz u s theory 177 Napier, 1996, p. 7-39; 2002, p ; Carnegie, Rodrigues, 2007, p ). t the same time the accounting historians indicate a need for further research by scientists outside the field of nglo Saxon (Carmona, 2004, p. 7-23; Walker, 2005, p ). 2. RGNIC WRK S MJR NTINL TSK IN THE SCIL ND PLITICL SITUTIN IN THE PRUSSIN PRTITIN German expansion was a dangerous challenge for the Polish nation. To deal with it, a programme of organic work in the field of the economy, education, culture and social organization was developed and adopted as the main weapon in resisting Germanization. Maintaining Polish ownership of land was considered as the main priority. It required modernization of farm management in landed estates, which were mostly in poor condition, and improvement of peasant farming. number of associations was established to support modernization of manorial and peasant farming practices, such as the Industrial Society in Poznań headed by Hipolit Cegielski, Central Economic Society in Great Poland (west-central part of Poland), and Polish gronomic Society in West Prussia, which coordinated the activities of local associations (Zdrada, 2005, p. 570). Numerous agricultural exhibitions and demonstration [Landowner] organ of the Central Economic Society. t the initiative of J. u an agricultural school was founded in the village of śabikowo near Poznań (Kozłowski, 2006, p. 180). Extensive educational work was conducted among the peasant population. Farmers associations, promoted and supported by the Central Economic Society, were proliferating. They had a significant impact on improving the quality of agricultural production and farm management practices. Farmers associations were organizations allowed by law, but nevertheless they were viewed with suspicion by Prussian authorities, which knew that they were bastions of Polish resistance. tto von Bismarck, Chancellor of the German Empire, waged ruthless war against his opponents, among whom he included Poles and all Catholics. The war with the Catholic Church that he instigated was in Great Poland a method of preventing the influence of Polish clergy and gentry on the people. s part of Bismarck s Kulturkampf, Polish language was banned from public life and was replaced by German. mong numerous repressive measures involved in Germanisation was closure of the Higher School of griculture founded by the Central Economic Society. 178 Mikołaj Turzyński 3. JULIUSZ U BIGRPHICL NTE Juliusz u was born in 1842 in Poznań and died in Dublany near Lvov. He studied in Heidelberg, Hohenheim and the gricultural cademy Popelsdorf, where he received the title of associate professor for a thesis on mineral fertilizers. 1 He launched an initiative, in cooperation with the Central Economic Society, to establish an agricultural school in the village of śabikowo near Poznań. It was founded by an eminent scholar and activist, ugust Cieszkowski, 2 who named it, after his dead wife, the Halina Higher School of griculture, 3 and donated his manor farm for the purposes of agricultural education. The school, which was at that time the only higher education institution in the Prussian partition, started operation on 21 November (Bernacki, 2007a, p. 7; Kozłowski, 2006, p. 181). Its building, now of historical value, is situated in the old part of the town of Luboń. J. u was the headmaster of this educational establishment for six years, until it was closed down by the Prussian government. In 1876 he became the headmaster of the Higher School of griculture in Dublany near Lvov, taken over by the Galician National Department. He held this position until the end of his life (Bernacki, 2007a, p. 7). J. u was very active, both professionally and in the field of social work. He was a co-organizer, among others, of the Central Economic Society in Poznań, the Galician Economic Society in Lvov, and the Rhone Country Economic Society. His major publications include History and organization of the Higher School of griculture in Dublany [Yearbooks of the National Higher School of griculture, vol. I, 1888], a chapter in Vol. V of Encyklopedia rolnictwa of 1879, containing information on experimental stations conducting research in farming, forestry and technology, numerous articles in Ziemianin, Gazeta Rolna and Rolnik Lwowski, and, first of all, a manuscript devoted to agricultural accounting. It was published after J. u s death by his pupils, under the title Nauka rachunkowości do potrzeb gospodarstwa wiejskiego zastosowanej [ccounting for farm management purposes] (1889). J. u s private book collection with 1 In a thesis entitled J.v. Liebig's Lehre von der Bodenerschopfung und die national oekonomischen Bevolkerungstheorien dargestellt und kritischgepruft (1869) he discussed the question of returning to soil the mineral elements used by plants (Dembiński, 1970, p. 9-31). 2 It was the wish of ugust Cieszkowski that the school be named Halina, after his deceased wife. 3 ugust Cieszkowski studied at Jagiellonian University, received the title of Doctor of Philosophy from the University of Heidelberg; one of the founders of the Polish League and the Poznań Scientific Society; philosopher, economist and social activist; a proponent of action as the main principle of existence and history, he invested it with moral and religious connotation on the basis of Christian principles, with reference to the Slavik issue and Polish cause. 4 wing to the staff and the research and teaching achievements of the Higher School of griculture in śabikowo, the Faculty of griculture and Forestry was formed as one of the first faculties of the University of Poznań, founded in 1919. Performance measurement in Juliusz u s theory 179 thousands of volumes on the subject of economy was donated to the National Higher School of griculture in Dublany and was completely damaged during the Polish-Ukrainian war in (Bernacki, 2007a, p. 8). 4. JULIUSZ U S CCUNTING THERY Juliusz u developed a comprehensive, consistent proposal for farm accounting deserving to be called accounting theory. It covers three cognitive levels (aspects): general level, comprising the concept, objectives and accounting methods; procedural level, setting out rules for assets valuation, choice of the accounting period and calculation of production costs; supporting level, comprising organization of accounting, statistical data collection and audit procedures. Figure 1 presents the structure of farm accounting theory designed by J. u. S u p p o r t i n g l e v e l R G N I Z T I N F C C U N T I N G V L U T I N R U L E S P r o c e d u r a l l e v e l G e n e r a l l e v e l ccounting conception ccounting objectives ccounting methods B u d g e t i n g p r o c e d u r e s C S T C L C U L T I N U D I T P R C E D U R E S C o l l e c t i n g s t a t i s t i c a l d a t a Fig. 1. Structure of J. u s theory of farm accounting Source: author s research based on u (1889). 180 Mikołaj Turzyński J. u stated that the value of agricultural products is determined by the needs of society reflected in the market (fair) price or by the needs of a farm if the produce is used for such purposes. He pointed to effective organization of farm management as one of the ways of profit maximization, and emphasized the role of accounting in this task. He saw accounting as a touchstone of good organization and a foundation for its improvement (u, 1889, p. II). He defined accounting as recording, collecting and systematic aggregating, in numerical terms, of all data relating to the state of the enterprise [...] and transactions carried out in a specified period of time, to show whether this state was favourable or unfavourable and whether the transactions were beneficial to the purpose of this enterprise or did not contribute to its attainment. He also stressed the role of accounting in ensuring accountability of persons responsible for the functioning of a farm. J. u (1889, p. 3-5) formulated the following objectives of accounting: showing the assets position; showing the financial position; showing the financial results; assessment of profitability of different sections of the agricultural entity; determining return on capital; predicting the ability for continuing operation and prospects for profit growth; providing possibility for administrative function assessment; performance of the control function. He also prescribed the following accounting methods (u, 1889, p. 8-37): comparing annual inventories single-entry accounting methods; single-entry accounting proper; cameral accounting; double-entry accounting. He was of the opinion that only double-entry accounting is appropriate for the farming business because: The farmer should not bother himself with useless theories, and should not use arbitrarily set prices, but neither should he unthinkingly forego an accounting system which is capable of providing strict control and show which directions to pursue and which to give up (u, 1889, p ). In addition to setting out detailed rules for keeping accounting records he provided guidelines for choosing the accounting period and preparing the opening balance-sheet. He claimed that proper accounting, regardless of the method adopted, begins with inventory-taking (1889, p. 39). He proposed the following valuation methods (u, 1889, p. 45): current market (fair) prices as a basis for current assets valuation; average market prices for long-term assets valuation; production cost for valuation of assets intended for use. Performance measurement in Juliusz u s theory 181 J. u argued that valuation at current market price is the simplest, as it requires knowledge of prices at the nearest market-place. For valuation based on average market prices he recommended taking into account the prices at the nearest market in at least a five-year period. He warned that valuation at production cost, used for items whose market value due to its absence cannot be reliably measured, is the most difficult (u, 1889, p ). The Table 1 below presents rules for valuation of assets, proposed by J. u. Valuation at current market prices farm produce for sale; saplings ready to be sold; domestic animals (excluding those intended for internal use); animal products intended for sale; finished goods; financial assets. Table 1. J. u s rules for assets valuation Valuation at average market prices land (excluding land purchased recently, which is valued at purchase price; buildings, structures, improvements, and plantations (excluding those whose acquisition price or production cost are known; in these cases depreciation charges are made). Valuation at production cost farm produce not intended for sale; animal products not intended for sale; natural fertilizers; livestock raised on the farm; buildings, structures, improvements and plantations whose production costs and depreciation charges are known; tools and machines produced internally; materials intended for further transformation. Source: author s research based on u (1889, p ). J. u argued that attempts at valuation of items for which market prices do not exist according to artificial prices leads to fictitious, arbitrary figures, which results in double-entry accounting becoming a misleading exercise (u, 1889, p. 29). He attached great importance to accounting theory, expressing his concern that It is in accounting theory that the need exists to clarify the simplest matters complicated by pseudo-scholars, the need to explain, even to people otherwise quite reasonable, that two and two makes four (u, 1889, p. 48). J. u explained that assets intended for internal consumption have only use value, which is equivalent to their cost. nly those assets which are to be sold have exchange value. He defined price as an asset's exchange value expressed as a certain amount of another good that [...] we can obtain in exchange, and market (fair) price as an asset s exchange value expressed as the amount of money that we can obtain for it in the market-place (u, 1889, p. 49). lthough his own achievements in the field of agricultural chemistry are quite impressive, J. u (1898, p. 77) declared, that ccounting is a discipline in 182 Mikołaj Turzyński which accountants and economists are the people that are really necessary. However, each pseudo-scholar thinks that it is his duty to patch on at least some chemistry, to make matters look more scientific. The result, naturally, resembles a patchwork, not very practical or useful. He pointed out that having information on three main economic factors land, capital and labour it is possible to determine precisely the value and profitability of the assets. J. u also proposed solutions relating to costing and pricing of resources utilized in the farming business, such as feed for farm animals or fertilizers. When giving formulas for cost calculation, he reminded that accounting is concerned with what a given product costs and what the price should be to make it profitable, and not with what it is made up of. From the costing perspective, he made a distinction between animal feed produced on purpose, e.g. crops grown for use as fodder, and feed obtained as by-product, scrap or waste. For crops grown to produce feed he included in calculations such items as rent paid for the use of meadows and fields, cost of capital engaged in production, depreciation charges on improvements (draining system), overhead costs (e.g. administration, taxes, insurance) and wages. For feed obtained as by-product (e.g. straw) he recommended valuation as difference between revenue from grain and cost of production, including costs of transport and storage. Feed obtained free of any cost should not be valued at all. J. u attached great importance to budgeting. It is not enough [...] to perform accounting calculations which show ex post if and to what extent the goal of the farming unit has been attained [...]. It is necessary to make relevant calculations well in advance to be able to control all activities in the farming business to ensure that they meet the desired end (u, 1889, p. 90). He argued that a properly performed planning process was essential to effective business activity, including farm operation. He viewed the revenue budget as guidelines for the employees and also as a tool of management control. Comparison of budgeted and actual figures provides a basis for evaluation of management. He explained that the budgeting process should begin with drawing up detailed budgets for major elements of property and major sections of the farming business, and should end with preparation of a master budget. The individual partial budgets should be prepared by persons
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