October has been recognized as Italian American Heritage Month in the United States since 1989. In addition to their significant contributions to American history and culture, Italians have an extensive history of innovation in the field of accounting going back hundreds of years. In fact, the modern system of accounting known as “double-entry” bookkeeping was an invention of the famous Italian mathematician, educator, author, and Franciscan friar Luca Pacioli. In a world of constantly evolving technology, regulations, and global economics, Pacioli’s methods of accounting remain the standard after five hundred years. This article will highlight some of the most important events and accomplishments of Luca Pacioli’s life and career.
Luca Pacioli was born in Sansepulcro, Tuscany during the middle of the Italian Renaissance. By the time he was 25 years old, he had taken on his own students and written his first instructional mathematics book. In 1946, Pacioli had gained a reputable student that would change the trajectory of history: Leonardo DaVinci. For years, they continued to work together, with DaVinci later crediting some of his most famous sketches to Pacioli’s teachings. Pacioli and DaVinci’s works greatly influenced advancements in art, architecture, and mathematics.
His greatest contributions to global economics are a result of a text he authored, the Summa de Arithmetica. This was a summary of a variety of mathematical innovations known-to-date, not just his own innovations. However, he clearly outlined and defined the components of the double-entry accounting system within the Summa de Arithmetica, which quickly became the standard for commercial bookkeeping throughout the world.
Until Pacioli, financial records were extremely basic; for example, how much money was earned or spent on a given day. While it is useful to track the flow of physical currency, the old system lacked the ability to maintain a balanced budget. The terminology and definitions of several key accounting functions were first created by Pacioli, including assets, liabilities, capital income, expense accounts, trial balances, and more.
The double-entry accounting system is one of the most consequential business practices in human history. Businesses were more organized, efficient, and profitable. Logistics, and trade in general, flourished during this period. In a time of such technological advancement in engineering, maritime travel, printing, and exploration, Pacioli’s advancements in accounting could not have been more perfectly timed.