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What did Italian merchants of the 1490's have to do with double entry accounting?

My first manager asked me a question that I've always remembered. She said "Do you ever ask yourself who came up with debits and credits? They must have been incredibly smart."

On a personal level I love this question. It displayed my manager's passion about a subject that pretty much topped my nerd scale. This particular manager had a real impact on my development with questions like these. She made me think "if someone can be this passionate about their role in finance then maybe one day I can too". For 22 year old me staring down the barrel of the next 45 years of my life in this career, things became a bit more bearable.

On another level, yeah uhh, good question, who actually invented debits and credits? I don't remember learning about them at Uni.

I've written up an e-mail to my manager below:

Hi Olivia,

Apologies for the 10 year delay, I was busy with month end.

Happy to say that I found the answer for you, but it's not as simple as Dr Credit discovering double entry accounting and proclaiming it as such.

Turns out debits and credits weren't invented by a single person. The first recorded use of double entry accounting was in an Italian paper written in the 1490's named 'Summa de Arithmetica'. This translates not to 'The Summer of Arithmetic' - that was my schoolies, but in fact 'A Summary of Arithmetic'. Designed to be a textbook of sorts, this paper contained a repository of mathematical knowledge at the time. This included a short section on double entry accounting.

Having read the double entry section of this paper now, it's clear to me that Xero takes no heed to our trailblazing forefathers. Criminal, if you ask me.

First, it was customary in all ledgers to write the years in Roman numerals, an example being "MCCCCLXXXXIII". Imagine those in our drop down would take me XXIII years to run a comparison report...nuts.

Second, I personally would love to see "In the name of God" at the top of each inventory breakdown. According to author Pacioli, His Holy Name should always be in the minds of the accountant. Oh how the art of worship has changed throughout the years.

One thing that I appreciate hasn't stood the test of time is the fact that all transactions should be recorded "in the absence of the owner, by his servants or his women if there are any". Problematic as this is, the positive update is that in 2021 the US estimated that 49% of businesses started were by women. A rewrite of this one is thankfully required.

Now get your geek hats on because we're onto the juicy stuff - the paper outlines the methods of double entry accounting in the 1490's using 3 reports:

1 - Memorandum Book (brief dot points of all incoming and outgoing transactions...written by the owner, the slave or "the women")

2 - Journals (Detailed description of financial movements pertaining to each transaction, no DR or CRs reported here)

3 - Ledger (DR and CR of each transaction)

A trial balance was run by manually adding up all the ledgers over a period of time. No mention of T-ledgers, but one would assume that this was a natural progression down the line.

I certainly take for granted the idea of pressing a button to reveal a P&L or trial balance, all updated in real time. I can single-handedly do RecHound's finances using Xero, while also doing everything else involved with starting a business. It's the kind of stuff that accountants from that era could have only dreamed of.


So there you have it - double entry tried and tested, in a textbook summarising the work of Italian Merchants during the Renaissance. It seems that the idea of assets offsetting personal capital to create the double entry is a concept that was discovered and iterated over time. Communal knowledge and insights were shared to develop a 500+ year-old unchanged foundation. If there was ever a reason to use your knowledge to assist others within your industry, this is one of the world's best examples of why you should.

Anyway, I hope you've had a chance to make it back home to South Africa over the years, we should catch up for some dirty dumplings soon. My rules are if it's rated more than 3.5 stars on Google or costs more than $1 per dump then it's out. Hope you understand.




Time to write - 5 hours

Time to edit - 1 hour

AI used - <1%


Image by wirestock on Freepik


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