Double Entry Bookkeeping – All Entries Are Recorded Twice
Welcome to my daily accounting and finance blog. Today is September 25, 2018.
My blogs are designed to teach basic accounting and financial concepts that everyday people can apply to their financial and business lives. Each day I will explain an accounting or financial concept in general terms. I will start with easy topics, and move on to more complex topics over time.
Today’s topic is “The History of Double Entry Bookkeeping.”
Double entry bookkeeping is a system of recording transactions where each entry is recorded twice, as a debit and a credit. Debits are on the left and usually show where the money in the transaction went. Credits are on the right, and usually show where the money came from. This system was originally developed to reduce mistakes. At the end of the day, debits have to equal credits, otherwise something is wrong.
The early Italians have been credited with developing double entry bookkeeping. The earliest known evidence of this came in 1211 from a Florence banker. From this time double entry bookkeeping continued to grow throughout Italian businesses, notably in Florence, Genoa, and Venice.
However, it was not until 1494, two years after Columbus sailed to America, that the principles of double entry bookkeeping were put into print. Luca Paciola, a monk from Venice and friend of Leonardo da Vinci, published a book on mathematics. The book was called “Summa de Arithmetica, Geometria, Proportioni et Proportionalita” (Everything About Arithmetic, Geometry and Proportion). This book, written as a guide to existing mathematical knowledge, covered five topics. One of the topics was bookkeeping, for which there was 36 short chapters. History has credited this book as being the official beginning of double entry bookkeeping.
However Paciolo never claimed to be the inventor of double entry bookkeeping as the first known book about the subject was written by Benedetto Cotrugli in 1458. This book, however, was not published until 1573. Paciolo, was familiar with the 1458 transcript and always credited Cotrugli as being the inventor of the double entry method.
The basic principles of double entry bookkeeping that were developed by the Italians during the 13th, 14th, and 15th centuries have generally remained unchanged to this day.
I hope you will enjoy my blogs and find them useful. Tomorrow’s topic will be “The Importance of Accounting.” Please drop by.
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