Monk who invented double entry

He was an Italian mathematician and Franciscan friar who also collaborated with his friend Leonardo da Vinci who also took maths lessons from Pacioli.

It is said that Luca Pacioli published works for the double entry accounting system based on procedures in use by Venetian merchants during the Italian Renaissance. The increasing complexity of these trade relationships required better record keeping, and the system of double-entry bookkeeping emerged. Men such as Josiah Wedgwood began implementing systems of cost accounting in their companies, and professional accountants began offering their services in London.

Such methods were carried over to the United States, and large firms such as General Motors adopted these accounting methods as well.

Today, standardized accounting practices are in use across the globe, helping companies around the world to stay afloat, attract investment, and keep the engine of the world economy running.

Luca Pacioli was born between and in Tuscany, Italy, where he received an education in the ways of medieval merchants and commerce. Over time, his interest in mathematics led him to become an expert tutor in the subject, and he wrote a textbook on mathematics to help instruct his students. During the years —, Pacioli became a Franciscan friar, but he did not end his tutoring career. In fact, one of the people Pacioli later taught mathematics to was none other than the Renaissance Man himself: Leonardo da Vinci.

Da Vinci and Pacioli later collaborated to write De Divina Prop o rtione , a treatise on the mathematical and artistic concept of the golden ratio. While these two lived together in Milan, Da Vinci learned a lot about mathematics from Pacioli.

The knowledge he gained would help Da Vinci create some of the excellent anatomical drawings for which he is known today. The income statement showed, over a time period, total revenues minus total expenses, leaving either a profit or loss. The balance sheet was compiled at a point in time and illustrated the assets, the debts, and the difference in the owners' equity.

These financial tools enabled the entrepreneurs to allocate resources more effectively. As an example, if the business person owned two restaurants, they could look at each income statement and seeing the profits or loss, they could determine which one to close and which one to invest more money in. On a larger scale, trading ships were soon analyzed by income statements and more and more decisions began to be understood using the tools of accounting, leading to greater efficiency of capital, the savings of a society.

Out of the income statement came the intellectual miracle of the return on investment ROI which allowed investors to compare investments mathematically with the simple ROI formula and soon after, the business community started to add risk to the analysis which was another game changer. This combination of risk and return into business analysis became the basis of modern business theory and decision making.

The balance sheet had a great effect as well. The Venetians had abandoned as impractical the Roman system of writing numbers, and were instead embracing Arabic numerals. They may have also taken the idea of double-entry book keeping from the Islamic world, or even from India, where there are tantalising hints that double-entry bookkeeping techniques date back thousands of years.

Or it may have been a local Venetian invention, repurposing the new Arabic mathematics for commercial ends. Before the Venetian style caught on, accounts were rather basic. Early medieval merchants were little more than travelling salesmen. They had no need to keep accounts - they could simply check whether their purse was full or empty.

But as the commercial enterprises of the Italian city states grew larger, and became more dependent on financial instruments such as loans and currency trades, the need for a more careful reckoning became painfully clear. We have a remarkable record of the business affairs of Francesco di Marco Datini, a merchant from Prato, near Florence, who kept accounts for nearly half a century, from to They begin as little more than a financial diary, but as his business grew more complex, he needed something more sophisticated.

Six months later the sheep are shorn. Several months after that, 29 sacks of wool arrive in Pisa, via Barcelona. The wool is coiled into 39 bales. Of these, 21 go to a customer in Florence and 18 go to Datini's warehouse, arriving in , over a year after the initial order. They are then processed by more than separate subcontractors. Eventually, six long cloths go back to Mallorca via Venice, but don't sell, so are hawked in Valencia and North Africa instead.

The last cloth is sold in , nearly four years after Datini's original order. Fortunately, he had been using bookkeeping alla Veneziana for more than a decade, so was able to keep track of this extraordinarily intricate web of transactions. So what, a century later, did the much lauded Luca Pacioli add to the discipline of bookkeeping?

Quite simply, in , he wrote the book. Amidst this colossal textbook, Pacioli included 27 pages that are regarded by many as the most influential work in the history of capitalism. It was the first description of double-entry bookkeeping to be set out clearly, in detail and with plenty of examples. Pacioli's book was sped on its way by a new technology: half a century after Gutenberg developed the movable type printing press, Venice was a centre of the printing industry.