The development of accounting thought – Luca Pacioli

History of Double Entry System

Accounting has a long history. Archaeologists continue to be interested, for example, in ancient Mesopotamia and excavate in order to find clay tablets which record early examples of writing. Most of these clay tablets contain
accounting records, which lends support to the claim that the invention of writing was due to the need for accounting records. Early examples of accounting systems can also be found in other ancient civilisations such as
China, Greece, Egypt and South America. Further early examples can be found in the ancient civilisations of South America. It is also possible to contend that the pre-eminence of these ancient civilisations compared to their neighbours was due in part to the well-developed accounting systems which these civilisations utilised.

Luca Pacioli

It is thought that double entry accounting developed in the Italian city-states in the 1300s. The Franciscan monk, Luca Pacioli, wrote the first known book on double entry accounting, published in 1494. It is important to note that he did not invent double entry accounting. It is also interesting to note that Pacioli was a mathematician, and further that he was good friends with Leonardo Da Vinci. In fact, this famous artist provided illustrations for some of Pacioli’s
books.

Pacioli’s book was very important to double entry accounting because his writings were copied (plagiarised?) throughout Europe over the next few centuries and the double entry accounting system that we use today still bears
distinct traces of the original system described by Pacioli.

Since Pacioli’s time, two inventions of mankind have developed the importance of accounting to modern society. The first of these is the development of the company or corporation with shared ownership. This invention gives rise to the need to develop detailed accounting records so that the many owners of the enterprise can be informed of the efficiency and effectiveness of the management of the enterprise in which they have invested their money. The
other invention which has increased the importance of accounting is called income tax. All modern governments charge income tax on the individuals and corporations in their countries. In order to calculate income tax, obviously,
some accounting records are necessary.

Also, note that Pacioli and Leonardo da Vinci were good friends and collaborated on a book by Pacioli on ‘Divine Proportions’ published in 1509. Pacioli was the author and Leonardo did some illustrations including the famous
Vitruvian Man. Pacioli and Leonardo da Vinci had a mutual interest in measurement. A bestselling novel (and movie), ‘The da Vinci Code’ by Dan Brown uses the Vitruvian man as part of the plot. Unfortunately, Pacioli
doesn’t get a mention in Brown’s book. Seems a bit unfair.

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