Luca Pacioli: The Father of Accounting

Introduction and Background

Modern accounting is largely attributed to the Italian mathematician, educator and Franciscan monk FraLuca Bartolomeo de Pacioli, (known as Luca Pacioli), who lived from 1445-1517. A true Renaissance man and a learned scholar, Pacioli studied a variety of subjects such as business, military science, mathematics, medicine, art, music, law and language. Pacioli is credited with the first publication of the “Venetian method” of keeping accounts, known today as “double-entry bookkeeping”, a system for maintaining financial records.

Pacioli was born in Sansepolcro, Italy. As a young boy, Pacioli came under the influence of the artist Piero della Francesca, a figure who greatly impacted the direction of Pacioli’s writings and education. At twenty years of age, Pacioli traveled to Venice to become a tutor to the sons of a wealthy merchant.

In 1471, he arrived in Rome and entered the brotherhood of St. Francis. Pacioli journeyed extensively, wandering through Italy (and possibly to the Orient) while lecturing on mathematics in the universities of Rome as well as Perugia, Naples, Pisa, and Venice. He was at the court of Ludovico Sforza and became acquainted with at with Leonardo da Vinci at Milan. It was here that Pacioli became the first occupant of the chair of mathematics. Wanting to return to the place of his birth, Pacioli spent the last years of his life in Florence and Venice. He died in 1517.

Publications

Pacioli’s principle work Summa de arithmetica, geometria, proportioni e proportionalita (Everything about Arithmetic, Geometry, and Proportions) was published in 1494. This work, 600 pages of small print in Italian, was not aimed to serve a particular section of the Italian community, and thus served as a comprehensive guide on several aspects of mathematics and bookkeeping. Pacioli’s treatise on bookkeeping was the first printed book to address a system developed by the merchants of Venice of the double-entry method, still held in esteem by the accounting community.

Pacioli dedicated 36 short chapters of his Summa to bookkeeping, which he entitled De Computis et Scripturis (Of Reckoning and Writings. Written as a comprehensive overview on existing mathematical knowledge, Summa was printed only twenty-five years after Gutenberg had invented the printing press. In his signature treatise, Pacioli drew upon the writings of Leonardo of Pisa for his section on the theory of numbers, seeking to preserve some of Pisa’s lost and virtually unknown works.  

The Summa is divided into two parts. The first portion covers the subjects of arithmetic and algebra, the second, geometry. In the arithmetic portion, Pacioli established rules for the fundamental operations and outlined a method for finding square roots. He also accounts for mercantile arithmetic, analyzing bills of exchange and the theory of bookkeeping. In the algebra portion, Pacioli explains linear and quadratic equations and problems leading to these equations. Throughout the geometric sections, Pacioli applies algebra in order to investigate the properties of figures. The Summa formed the basis of the significant works of the sixteenth century mathematicians, including Cardano and Tartaglia. In addition, Summa was written in the vernacular, which allowed his countrymen to learn existing knowledge on the subject of algebra and thus contribute to its advancement in the 16th century.

Pacioli’s 1509 publication Divina proportione discussed the “Divine Proportion” or “golden ratio”, and the related theorems of Euclid. Leonardo da Vinci drew the figures for the text that also included results on regular and semiregular polyhedra. Pacioli also published a Latin translation of Euclid’s Elements based on the thirteenth century translation of Giovanni Campanus.

Upon his death in 1517, Pacioli left behind an unpublished major work De viribus amanuensis, which described recreational mathematics, geometry problems and proverbs. Though nicknamed the Father of Accounting, Pacioli did not invent accounting. He did, however, record and distill the practices employed by the merchants of Venice at the time. A keen and acute observer, Pacioli kept numerous journals and ledgers of his own. His ledger included assets (such as receivables and inventories), liabilities, capital, income and expense accounts. He demonstrated yearend closing entries, proposed that a trial balance be used to prove a balanced ledger, and wrote extensively upon accounting ethics.

Pacioli’s Legacy

Pacioli’s writings on the double-entry bookkeeping system standardized commerce as one business could follow the transactions of another. His “Computis” codified a system of reliable and efficient record keeping and established a basis of financial understanding that made global investment possible. As trade and exploration rapidly developed and expanded in the fifteenth century, Pacioli’s system allowed people to record investments in and results of voyages of discovery, which was imperative in order to attract and maintain the participation of wealthy merchants. Without Paciolo’s written system, trade with the New World and the Far East would have been slowed or even halted altogether.

Pacioli played a significant role during the Renaissance, a period that gave way to the integration of ideas and subjects. During this time, science, business, engineering, and art, were closely related and integrated. Mathematics was central to, and a part of all, fields. Pacioli established important connections among these fields and his colleagues working within them. In the first century after its publication, Pacioli’s Summa was translated into five languages, and numerous books on double entry bookkeeping appeared in Dutch, German, English and Italian, helping quickly to spread the knowledge of the “Italian method” throughout Europe. Both the sequence of events in the accounting cycle and the special procedures he described are familiar to modern accountants.  The only substantial differences between current bookkeeping practices and the “Method of Venice” are additions and expansions which were brought about by the needs of a larger scale of business operation.

Additional Resources

• History of Accounting by John R. Alexander provides a complete history of accounting from the ancient period through the twentieth century.
• Luca Pacioli’s Polyhedra provides an analysis on Luca Pacioli as depicted in a painting by Jacopa de Barbari as well as links for further research.
• The Golden Section provides an analysis of Luca Pacioli’s rediscovery of the “golden secret”.
• Luca Pacioli Biography contains a well-written and informative biography as well as links for additional research.
• History of Double Entry Bookkeeping contains information on Pacioli’s method of double entry bookkeeping.