An Appropriation System Suitable for a Divisional Organization: Historical Study

The appropriation system, which was initially established by DuPont Powder Company in the early 20th century, is a mechanism by which top management allocates funds to each division or department efficiently and systematically, and plays a significant role in supporting decision-making in management accounting. The appropriation system was adopted by DuPont, which acquired DuPont Powder Company in 1915, as well as by the General Motors Corporation (GM). After adopting the appropriation system, each company converted the organization management from a functional organization into a divisional organization. In response to the conversion, they modified the original appropriation system to establish new appropriation systems. This paper aimed to examine why and how the new appropriation systems were developed, which were suitable for the divisional organization at DuPont and GM, based on original materials from the 1900–1920s. Particular attention was paid to the relationship between management accounting and company organization, by considering DuPont and GM’s business environment in the early 20th century. This study allowed us to extract and illustrate the actual states of the appropriation system and management accounting at DuPont and GM.