Once upon a time, Luca Pacioli wrote a math book. It was just a little survey and should
have been treated like ordinary books of the time and read and then disappeared into
historical archives and forgotten. A few brief chapters on practical mathematics made this
one special.
The time was 1494. Columbus had discovered America just two years before. The author
was a Franciscan monk.
The chapter on practical mathematics addressed mathematics in business. He said that the
successful merchant needs three things: sufficient cash or credit, an accounting system that
can tell him how he*ƒ*…½*ƒ”€¡s doing, and good bookkeeper to operate it. His
accounting system consisted of journals and ledgers. It rested on the invention of
double-entry bookkeeping. Debits were on the left side because that*ƒ*…½*ƒ”€¡s what
*ƒ*…½*ƒ‚°debit*ƒ*…½*ƒ‚± meant, *ƒ*…½*ƒ‚°the left*ƒ*…½*ƒ‚±. The numbers on
the right were named *ƒ*…½*ƒ‚°credits*ƒ*…½*ƒ‚±.
If everything was done right, then the bookkeeper could do a trial balance (*ƒ*…
½*ƒ‚°summa summarium*ƒ*…½*ƒ‚±). Add up all the debits and then add up all the
credits, he said. If everything had been done right, the totals should match. If not, *ƒ*…
½*ƒ‚°that would indicate a mistake in your Ledger, which mistake you will have to look
for diligently with the industry and intelligence God gave you.*ƒ*…½*ƒ‚± He wrote.
Experience
Before computers came along Jack had never got a trial balance right the first time. Many
hours were spent looking for the mistakes, though not necessarily with the reverent attitude
that Father Pacioli advised!
Double-entry bookkeeping was so simple and met the needs of business so well that it
caught on immediately.
In 1850 14 accountants offered services to the public in New York City, 4 in Philadelphia,
and 1 in Chicago. The British Isles was the superpower of world commerce. Many
enterprises and individuals employed the services of public accountants. Citing the needs
of courts to employ public accountants *ƒ*…½*ƒ‚°to aid those Courts in their
investigation of matters of accounting*ƒ*…½*ƒ‚± select accountants were titled *ƒ*…
½*ƒ‚°Chartered Accountants.*ƒ*…½*ƒ‚± The US equivalent title is *ƒ*…½*ƒ‚°Certified
Public Accountant*ƒ*…½*ƒ‚±. These titles are used to this day.
The arrival of the income tax laws were another major event in accounting history.
Attorneys naturally thought that since income tax returns were legal documents, they
would have exclusive rights to prepare them. Accountants replied that since that the bulk
of the work in preparing a return involved accounting calculations, they were more
properly accounting work.
Thesubstance of the tasks trumped legal argumentation. US law firms in the 1920*ƒ*…
½*ƒ”€¡s were slow to incorporate income tax preparations into their business skills. Public
