In: Accounting
Who was Josiah Wedgwood and what role did he play in the British Industrial Revolution and in the advancement of accounting? Also discuss how his new accounting techniques could have been used for in a very positive way, and how some of his new techniques could result in negative consequences.
Josiah Wedgwood was an English entrepreneur and a potter. He played a significant role in the British Industrial Revolution and in the advancement of accounting. He contributed to British Industrial Revolution through his excellent research of materials, through use of skilled labor and successful business organization. He also played a significant role in the advancement of accounting and this role of his came about due to the circumstances that his pottery business went in during the recession of 1772. His pottery business was facing a possible bankruptcy due to rising costs as well as rising level of inventory. To avoid a possible bankruptcy he made use of cost accounting to better control his costs. He used cost accounting in a radical manner and hence was able to determine costs for both materials as well as labor for each manufacturing step involved for each and every product.
His new accounting techniques could have been used for in a positive way. First of all costs and overheads could be better allocated and more systematically allocated by businesses. This will lead to better control of costs in future. Moreover his new accounting techniques can be used to determine which products cost more to manufacture and how prices and profits are related. Thirdly application of concepts of economies of scale can be applied by businesses to further rationalize their operations. In terms of negative consequences it will help businesses with regards to price differentiation and hence price manipulation. While price differentiation can help a business to increase demand and profit levels it may also encourage price manipulations on the part of the business and this may hurt the interests of the buyers and end-consumers.