Wednesday, March 18, 2009

Luca Pacioli: The Father of Accounting

Fra Luca Bartolomeo de Pacioli (sometimes Paciolo) (1446/7–1517) was an Italian mathematician and Franciscan friar, collaborator with Leonardo da Vinci, and seminal contributor to the field now known as accounting. He was also called Luca di Borgo after his birthplace, Borgo Santo Sepolcro, Tuscany.


Luca Pacioli was born in 1446 or 1447 in Sansepolcro (Tuscany) where he received an abbaco education. [This was education in the vernacular (i.e. the local tongue) rather than Latin and focused on the knowledge required of merchants.] He moved to Venice around 1464 where he continued his own education while working as a tutor to the three sons of a merchant. It was during this period that he wrote his first book -- a treatise on arithmetic for the three boys he was tutoring. Between 1472 and 1475, he became a Franciscan friar. In 1475, he started teaching in Perugia and wrote a comprehensive abbaco textbook in the vernacular for his students during 1477 and 1478. It is thought that he then started teaching university mathematics (rather than abbaco) and he did so in a number of Italian universities, including Perugia, holding the first chair in mathematics in two of them. He also continued to work as a private abbaco tutor of mathematics and was, in fact, instructed to stop teaching at this level in Sansepolcro in 1491. In 1494, his first book to be printed, Summa de arithmetica, geometria, proportioni et proportionalita, was published in Venice. In 1497, he accepted an invitation from Lodovico Sforza ("Il Moro") to work in Milan. There he met, collaborated with, lived with, and taught mathematics to Leonardo da Vinci. In 1499, Pacioli and Leonardo were forced to flee Milan when Louis XII of France seized the city and drove their patron out. Their paths appear to have finally separated around 1506. Pacioli died aged 70 in 1517, most likely in Sansepolcro where it is thought he had spent much of his final years.


Pacioli published several works on mathematics, including:

Summa de arithmetica, geometria, proportioni et proportionalita (Venice 1494)

a textbook for use in the abbaco schools of Northern Italy. It was a synthesis of the mathematical knowledge of his time and contained the first printed work on algebra written in the vernacular (i.e. the spoken language of the day). It is also notable for including the first published description of the method of bookkeeping that Venetian merchants used during the Italian Renaissance, known as the double-entry accounting system. Although Pacioli codified rather than invented this system, he is widely regarded as the "Father of Accounting". The system he published included most of the accounting cycle as we know it today. He described the use of journals and ledgers, and warned that a person should not go to sleep at night until the debits equalled the credits. His ledger had accounts for assets (including receivables and inventories), liabilities, capital, income, and expenses — the account categories that are reported on an organization's balance sheet and income statement, respectively. He demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. Also, his treatise touches on a wide range of related topics from accounting ethics to cost accounting.

De viribus quantitatis (Ms. Università degli Studi di Bologna, 1496–1508)

a treatise on mathematics and magic. Written between 1496 and 1508 it contains the first reference to card tricks as well as guidance on how to juggle, eat fire and make coins dance. It is the first work to note that Da Vinci was left-handed. De viribus quantitatis is divided into three sections: mathematical problems, puzzles and tricks, and a collection of proverbs and verses. The book has been described as the "foundation of modern magic and numerical puzzles", but it was never published and sat in the archives of the University of Bologna, seen only by a small number of scholars since the Middle Ages. The book was rediscovered after David Singmaster, a mathematician, came across a reference to it in a 19th-century manuscript. An English translation was published for the first time in 2007.

Geometry (1509)

a Latin translation of Euclid's "Elements".

De divina proportione (written in Milan in 1496–98, published in Venice in 1509)

Two versions of the original manuscript are extant, one in the Biblioteca Ambrosiana in Milan, the other in the Bibliothèque Publique et Universitaire in Geneva. The subject was mathematical and artistic proportion, especially the mathematics of the golden ratio and its application in architecture. Leonardo da Vinci drew the illustrations of the regular solids in De divina proportione while he lived with and took mathematics lessons from Pacioli. Leonardo's drawings are probably the first illustrations of skeletonic solids, which allowed an easy distinction between front and back. The work also discusses the use of perspective by painters such as Piero della Francesca, Melozzo da Forlì, and Marco Palmezzano. As a side note, the "M" logo used by the Metropolitan Museum of Art in New York City is taken from De divina proportione.

"The Ancients, having taken into consideration the rigorous construction of the human body, elaborated all their works, as especially their holy temples, according to these proportions; for they found here the two principal figures without which no project is possible: the perfection of the circle, the principle of all regular bodies, and the equilateral square.

The first printed illustration of a rhombicuboctahedron, by Leonardo da Vinci, published in De divina proportione.

Translation of Piero della Francesca's work

The majority of the second volume of Summa de arithmetica, geometria, proportioni et proportionalita was a slightly rewritten version of one of Piero della Francesca's works. The third volume of Pacioli's De divina proportione was an Italian translation of Piero della Francesca's Latin writings On [the] Five Regular Solids. In neither case, did Pacioli include an attribution to Piero. He was severely criticized for this and accused of plagiarism by sixteenth-century art historian and biographer Giorgio Vasari. R. Emmett Taylor (1889–1956) said that Pacioli may have had nothing to do with the translated volume De divina proportione, and that it may just have been appended to his work. However, no such defence can be presented concerning the inclusion of Piero della Francesca's material in Pacioli's Summa.


Pacioli also wrote an unpublished treatise on chess, De ludo scacchorum (On the Game of Chess). Long thought to have been lost, a surviving manuscript was rediscovered in 2006, in the 22,000-volume library of Count Guglielmo Coronini. A facsimile edition of the book was published in Pacioli's home town of Sansepolcro in 2008. Based on Leonardo da Vinci's long association with the author and his having illustrated De divina proportione, some scholars speculate that Leonardo either drew the chess problems that appear in the manuscript or at least designed the chess pieces used in the problems.

The Father of Accounting

In 1994, accountants from around the world gathered in an Italian village called San Sepulcro to celebrate the 500th anniversary of the first book written on double-entry accounting. The book was written by an Italian friar, Luca Pacioli (pronounced pot-CHEE-oh-lee).

The first accounting book actually was one of five sections in Pacioli's mathematics book titled "Everything about Arithmetic, Geometry, and Proportions." This section on accounting served as the world's only accounting textbook until well into the 16th century.

Because Pacioli was a Franciscan friar, he might be referred to simply as Friar Luca. While Friar Luca is often called the "Father of Accounting," he did not invent the system. Instead, he simply described a method used by merchants in Venice during the Italian Renaissance period. His system included most of the accounting cycle as we know it today. For example, he described the use journals and ledgers, and he warned that a person should not go to sleep at night until the debits equalled the credits! His ledger included assets (including receivables and inventories), liabilities, capital, income, and expense accounts. Friar Luca demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. Also, his treatise alludes to a wide range of topics from accounting ethics to cost accounting.

Pacioli was about 49 years old in 1494 - just two years after Columbus discovered America - when he returned to Venice for the publication of his fifth book, Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion). It was written as a digest and guide to existing mathematical knowledge, and bookkeeping was only one of five topics covered. The Summa's 36 short chapters on bookkeeping, entitled De Computis et Scripturis (Of Reckonings and Writings) were added "in order that the subjects of the most gracious Duke of Urbino may have complete instructions in the conduct of business," and to "give the trader without delay information as to his assets and liabilities" (All quotes from the translation by J.B. Geijsbeek, Ancient Double Entry Bookkeeping: Lucas Pacioli's Treatise, 1914).

Numerous tiny details of bookkeeping technique set forth by Pacioli were followed in texts and the profession for at least the next four centuries, as accounting historian Henry Rand Hatfield put it, "persisting like buttons on our coat sleeves, long after their significance had disappeared." Perhaps the best proof that Pacioli's work was considered potentially significant even at the time of publication was the very fact that it was printed on November 10, 1494. Guttenberg had just a quarter-century earlier invented metal type, and it was still an extremely expensive proposition to print a book.

Accounting practitioners in public accounting, industry, and not-for-profit organizations, as well as investors, lending institutions, business firms, and all other users for financial information are indebted to Luca Pacioli for his monumental role in the development of accounting.

Source: wikipedia,

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