Professional Documents
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Author(s): W. T. Baxter
Source: The Accounting Review, Vol. 21, No. 2 (Apr., 1946), pp. 154-166
Published by: American Accounting Association
Stable URL: http://www.jstor.org/stable/239919 .
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summarized this interpretation of economic history, teenth Century," Journal of Economic and Business
and pointed out its dubious features, in "Stages in History, III, p. 481; A. P. Usher, Early History of
Economic History," Journal of Economic and Business Deposit Banking in Mediterranean Europe (Boston,
History, II (1930), p. 395. 1943), p. 193.
2 Karl B ucher: Economic Evolution, translated by ' C. P. Nettels: Money Supply in Ike American
Wickett (1901). D. 128 d sex. Colonies (Madison, 1934), p. 163.
11 *
The answer is that they could and did. Wages due to me on board the
This is proved by their odd use of the word Schooner Lucy & charge the same to
"discount." Discount's original meaning Your humble Servt
was 'abatement" or "deduction," e.g., by Charles Anderson.
way of a counter-claim against a sum due.
That the orders were widely understood is
(Discount on a bill was one special type of
suggested by entries in Henchman's ledger
abatement: "interest discounted.") In- for two carpenters, one his debtor and the
stead of taking goods from C, A might
other his creditor; he puts through "dis-
build up a credit with him (or lower an count" entries to set off their balances. On
existing liability). So a variant to the notes
occasion, a verbal order might be a good
runs:
enough authority for such a cross-entry.
Pay into (or Discount with)
Apparently anyone who kept a ledger
Mr. James Dennie, or Order,
might be called on to transfer credit; every
Twenty Pounds.
bookkeeper thus performed one of the
Such "checks" might be endorsed and banker's functions, and clearance was not
circulate from hand to hand.20 I am not yet centralized.
sure whether any "usance" was normal; Most merchants of standing probably
probably, as in the above example, the performed several other of the banker's
drawer did not bother to specify when the functions. In telling the story of the Han-
payment or cross-entry was to be made. cocks, I have explained that any large firm
My impression is that a month here or of repute would naturally be called on to
there meant nothing in that easy-going so- deal in bills, to finance military campaigns,
ciety. Nobody seems to have fussed about to take charge of other people's funds, and
"discount" in our sense. Perhaps the ex- to invest these in securities such as pro-
change rates tendered for foreign bills took vincial loans or lottery tickets.21 But much
the time factor into account, though the less important men also carried out many
risk factor loomed a great deal larger in the of the banker's tasks for their customers.
mind of the buyer, who was willing to pay Because there were no specialized bankers
substantially more for bills drawn by mer- and little cash, trade and finance were per-
chants with first-class reputations. force tightly intertwined. Henchman was
Like the orders payable in kind, the mainly a bookseller, but an account for one
notes may well have had their genesis in of his country correspondents tells this
very simple requests, with the third person tale. In four months, the correspondent
acting merely as agent or messenger. One makes eleven deposits (eight in the form
possibility is shown by this letter: of cash delivered by captains, or others,
Boston Jany 10, 1769. and three by notes). On the other side are
shown a series of payments at the corre-
Sir,
spondent's order (e.g., for pasturing a
Please to pay my Wife Mary An-
horse); finally about ?500 of cash is with-
derson Five dolls per Month on Accot
drawn, together with ?950 made up of a
wedge of gold and 25 double doubloons.
few merchants, because craftsmen sell is suggested by E. F. Heckscher: "Natural and Money
Economy as illustrated from Swedish History," Jour-
straight to customers without intervention nal of Economic and Business History, III, p. 12.