Who is the father of modern accounting?

June 11, 2011

Luca Pacioli, the father of modern accounting, and his famous book The Summa.

1. Historical aspects of Luca Pacioli

In 1494 the book Summa de arithmetica, geometria, proportioni et proportionalita (The Collected Knowledge of Arithmetic, Geometry, Proportion and Proportionality) was published in Italy. Its author was the forty-nine-year-old Luca Pacioli (c. 1445–1517) from Sansepulcro, in Tuscany – a Franciscan friar, mathematician, university teacher and “Magister” (or master).

The Summa consisted of twenty-four chapters. One of them - Particularis de Computis et Scripturis - was devoted to accounting. In that chapter Pacioli described a system of bookkeeping (also known as "Method of Venice"), which Italian merchants used in those days – the Renaissance period.

In spite of the fact that Luca Pacioli had not invented or developed the Venetian method of bookkeeping, all the same he is fairly named as “The Father of modern Accounting.” Pacioli was the first to describe, systematize and publish the knowledge on accounting in a book, and his book has been the primary source of modern accounting till now.

2. Accounting terms and principles in Luca Pacioli’s book

Let us look at the chapter Particularis de Computis et Scripturis in more details. The following is a list of accounting terms, rules and principles that Luca Pacioli described in his book:

  • the double-entry accounting system;
  • debit is the left side of an account, and the credit is the right side of an account;
  • all debit amounts have to be equal to all credit amounts;
  • the usage of three books: a memoriale, a ledger, and a journal;
  • the memoriale is the document where a transaction is recorded first;
  • a journal contains records about all transactions in a chronological order listed in the debit and credit form;
  • all journal information is posted to the ledger;
  • closing entries must be made at the year-end;
  • the trial balance (summa summarium) is the final important step in the accounting cycle;
  • assets (account receivables, inventories), liabilities, equity, income, and expense accounts are presented in the ledger;
  • a necessity of keeping the documents.

It is easy to see that double-entry accounting rules and steps of the recording process, performed in the Pacioli’s work more than 500 years ago, are still appropriate. This confirms the significant influence of Luca Pacioli’s book on the accounting field.

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