A Nineteenth Century Welsh Iron Company

The law relating to the measurement and distribution of profits is very uncertain. This reflects itself in current practice. The Jenkins Committee ¹ itself has stated that “the only general rule that can with certainty be deduced is that profits must be ascertained by reference to ‘normal standards of commercial prudence’”. Some of the legal decisions affecting profitability and asset valuation are relatively old as far as companies are concerned, although all those quoted as authoritative do not date prior to 1868 ² . This is not surprising in view of the fact that the general law relating to companies was not consolidated until the Companies Act 1862, and this itself was to remain unaltered until 1908. In addition, income tax and other taxes based on profitability had not yet demanded a clearer definition of profit by the Courts than had hitherto prevailed. The use of the word “profit” in old accounts of landed estates and the like is common but often meaningless. It is difficult to construct a “model” of income measurement concepts which one could fairly claim to reflect “normal standards of commercial prudence” as exercised, say, in the eighteenth century. Yet twentieth century concepts surely have their roots in the past. This article attempts to throw light on aspects of profit measurement as contained in the accounts of an iron manufacturing company in South Wales for the period 1831–1860 ³ .