The Analysis of Financial Statements of the Central Office of the House of Mitusi and Search for Relation between Accounting policies and Financial Changes, 1710-1892

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Early in the 18th century the House of Mitsui created a divisionalized administrative structure with a central office known as Omotokata (O means great or general and motokata means cotroller) in order to control many operating shops. Mitsui's divisional structure consisted of two major operating divisions, the textile fabric division and the banking division. Omotokata was a general partnership composed of heads of nine families of the founder's descendants. It was not in charge of actual operations but held the investments in operating shops.The objective of this research is to analyze the financial statements of Omotokata in order to make clear of its profitability and financial structure from 1710 through 1892, and to examine the relation between the changes of Accounting policies and the transition of profitability and financial structure.Up to 1740 from the foundation of Omotokata in 1710, its capital stock was increasing at a favorable pace. The ninety percent of profit of the operating divisions was transferred to Omotokata every three years. Omotokata settled many kinds of reserves, such as reserves for bad debts, mongers' retirement allowance, reserve for illness of family-heads and so on, to retain the great earnings. Nominally, Omotokata's capital stock was increasing at a steady pace up to 1774, but profitabity of the operating divisions decreased and bad debts Omotokata increased. In 1774, writing off bad debts, Omotokata splits off the operating divisions, which the groups of family heads directly owns. In 1797, Omotokata held investments of the divisions again but ceased every three year setllement. After this Omotokata's capital stock was rominally increasing but its bad debts was increasing again.