Mercantile accounting 1 Accounting History Prof. Stefania Servalli Accounting, Accountability and Governance Introduction 2 https://www.youtube.com/watch?v=OoTc3wLTqkk Theorization of DEB Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità Luca Pacioli, Venezia 1494 Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità “Indigitazione” Counting with fingers Summa de’ Arithmetica, Geometria, Proportioni et Propotionalità Summa is a complex treatise dealing with different topics: arithmetic, algebra, business mathematics, accounting, mercantile practice, geometry It is written in vernacular (not in latin) and it is organised in 9 “Distinctio” further divided in “Tractati” • Distintio IX – Tractatus XI “De computis et scripturis” (About accounts and other writings): Theory of DEB for the first time in a printed book From folio 197V to folio 210V (27 pages) It is organised in 36 Chapters Tractatus XI “De computis et scripturis” The aim of Pacioli was to offer practical guidance to merchants about the way to keep all their accounts and books in good order Summa describes the accounting system used in Venice Pacioli underlines the importance to prepare an Inventory Books of the Merchant: - Memorandum - Journal (by … //to …) - Ledger Profit and Loss account and Balance sheet Exploring the origin of DEB 10 • Why did DEB appear in in Italy in the 13th century? Why did DEB appear in Italy in the 13th century? 11 Different perspectives: • DEB as a result of «trial and error» recognising that every transaction had 2 aspects (duality) or cash Debtor goods Cross-check: cash book and debtor book Why did DEB appear in Italy in the 13th century? 12 Cross-checking in Giovanni Farolfi 1299-1300 records Giovanni Farolfi was a Florentine merchant whose head office in France. The ledger relates exclusively to the branch in Provence. The Ledger of Giovanni Farolfi & Company is preserved in State Archive in Florence (filed under Carte Strozziane) Why did DEB appear in Italy in the 13th century? 13 • DEB as an evolution of charge and discharge accounting Despite these methods may be perceived as distinct there are examples of hybrid systems But, DEB goes further in classification of transactions (Galassi, 1996): - Nominal accounts (revenues and expenses) - Personal accounts (debtor/creditors) - Real accounts (other assets and liabilities) - Evidences about use of DEB from 1211 to 1299 in Italy, but not in the rest of Europe - In UK charge and discharge accounting was predominant Why did DEB appear in in Italy in the 13th century? 14 • Looking for a catalyst justifying the sudden change in 13th century • Hoskin and Macve have grounded the origin of DEB in educational advances occurred in medieval University from the 11th century (Hoskin and Macve, 1986; Macve, 1996) • Edwards (1989) increasing complexity of the Italian business environment, particularly in credit transaction • Contact with the East (Islamic world) (debate between Zaid (2000, 2001) and Nobes (2001) None single factor can explain the phenomenon satisfactorily References 15 Video: https://www.youtube.com/watch?v=OoTc3wLTqkk Chapter 5 of Routledge Companion to AH, Oldroyd and Dobie, Bookeeping.