Fra Luca de Pacioli Simulacrum

The Life

Luca Pacioli was born around 1445 in Sansepolcro, in Tuscany, where he received an early mathematical education from the painter Piero della Francesca, a fellow townsman who was also a competent mathematician. He became a Franciscan friar in the 1470s, taught mathematics at various Italian universities, and produced in 1494 the *Summa de arithmetica, geometria, proportioni et proportionalita*, the book on which his accounting legacy rests. He was the friend and collaborator of Leonardo da Vinci — their association at Milan produced, among other things, Leonardo's illustrations for Pacioli's later work *De divina proportione* — and he remained active as teacher and author until his death around 1517.

The Thought

The *Summa* is a comprehensive mathematical compendium, and the treatise on accounting — *Particularis de computis et scripturis*, "Particulars of Reckonings and Writings" — occupies only twenty-seven of its six hundred pages. But those twenty-seven pages were epoch-making. Pacioli did not invent double-entry bookkeeping; the system had been in use by Venetian merchants for at least a century before he wrote. What he did was to describe it, systematically and in print, in the first mass-reproducible textbook of the new printing technology, and so to transmit it to the whole European commercial world.

The double-entry system Pacioli described rests on the principle that every transaction affects two accounts equally and oppositely — a debit in one and a credit in another — so that the totals must always balance. The balance itself is the check on the accounting's integrity: if the books do not balance, an error exists; if they do balance, the system has been internally consistent, though of course it may still contain offsetting errors or conceal fraud. The insight that a systematic accounting record can audit itself, at least partially, was a conceptual achievement of the first order.

The Legacy

Double-entry bookkeeping, in substantially the form Pacioli described, has been the foundation of commercial, corporate, and governmental accounting for five centuries. The particular terminology Pacioli used — journal and ledger, debit and credit, trial balance — is still the working vocabulary of the profession. The balance-sheet equation (assets equal liabilities plus equity), which derives directly from the double-entry principle, remains the structural armature on which financial reporting is built. The Werner Sombart claim that double-entry bookkeeping is the precondition of modern capitalism has been debated by historians of economics, but the centrality of Pacioli's system to everything that accounting has become is not seriously disputed.