Luca Pacioli, "A Treatise on Accounts and Records". Luca Pacioli: biography

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

Accounting is an integral element of the modern economic system. As historical practice shows, ideas about money and its turnover are inextricably linked with the existing economic structure. With the development of statehood, there was a need to systematize and streamline financial transactions. A huge contribution to the solution of this problem was made by Luca Pacioli, the "father" of accounting. Next, we will find out what the merit of this mathematician is.

Luca Pacioli: biography

He was born in 1445 in the Apennines, in the small town of Borgo Sansepolcro. As a boy, he was sent to a local monastery to study with an artist. In 1464 Luca Pacioli moved to Venice. There he was engaged in the education of merchant sons. It was at that moment that his first acquaintance with financial activities took place. In 1470, Luca Pacioli (the photo of the mathematician is presented in the article) moved to Rome. He is therefinishes compiling his textbook on commercial arithmetic. After Rome, the mathematician goes to Naples for three years. There he was engaged in trade, but, apparently, without success. In 1475-76 he became a monk and joined the Franciscan order. From 1477, Luca Pacioli taught for 10 years at the University of Perugia. During his career, his ability to teach was repeatedly marked by salary increases. While working at the university, he created the main work, one of the chapters of which was the "Treatise on Records and Accounts".

In 1488, the mathematician left the department and went to Rome. For the next five years he was on the staff of Pietro Valletari (bishop). In 1493 Pacioli moved to Venice. Here he prepared his book for publication. After a year's rest, Pacioli accepted the chair of the University of Milan, where he began to teach mathematics. Here he meets Leonardo da Vinci and becomes his friend. In 1499 they moved to Florence. There Pacioli taught mathematics for two years. After that, he goes to Bologna. In this city, almost half of the local budget was directed to the maintenance of the university. Acceptance of a mathematician to such a profitable and prestigious position speaks of his recognition.

A few years later, a part of a book written by Luca Pacioli, A Treatise on Accounts and Records, comes out in Venice. The publication date of this work is 1504. By 1505, the mathematician had practically retired from teaching and moved to Florence. But in 1508 he again went to Venice. There he gave public lectures. However, his main occupation at that time was the preparation foredition of his translation of Euclid. In 1509, another book was published by Luca Pacioli, On the Divine Proportion. In 1510, the mathematician returned to his native city and became a prior in the local monastery. However, his life was burdened by numerous intrigues of envious people. This was the reason that four years later he again left for Rome. There he taught at the Mathematical Academy. Luca Pacioli returned to his hometown shortly before his death - in 1517.

The contribution of a mathematician to the development of methodology

To fully understand the significance of the book that Luca Pacioli wrote ("Treatise on Accounts and Records"), it is necessary to appreciate the principles he put into the system. Almost all experts say that the criteria proposed by the mathematician existed before him. For example, one cannot assume that Luca Pacioli is the author of a double entry. It existed before him. In this case, the question arises, what is the contribution of a mathematician in such a case? Unlike his contemporaries, Pacioli believed that everything important had already been invented before. He saw the main task of scientists in the most effective construction of a training course. Pacioli did not imagine scientific creativity outside the pedagogical process. Therefore, teaching has become an integral part of his life.

The ideas that Luca Pacioli had completely determined his scientific approach both to solving mathematical problems and related disciplines. This position was fairly accurate later.defined by Galileo. Luca Pacioli's knowledge of mathematics was closely connected with the study of the harmony of the world. At the same time, the correctness of geometric figures, as well as the convergence of balance, became manifestations of this harmony for him. The scientist did not just fix those practices that existed earlier, but gave them a scientific description. This is the main significance of the activity carried out by Luca Pacioli. The "Treatise on Accounts and Records" thus became the foundation for the improvement of the balance sheet system.

The essence of the scientific approach

The reflection of the facts at the time of their existence is the most accurate. But at the same time, such a technique does not contribute to the further development of practices, since the method of cognition is focused on the past, the exact reproduction of what has already happened and is taking place. The approach used by Luca Pacioli made it possible to assess the situation not only in the period of its development, but also in the future, as well as from the side of systemicity and integrity. In his work, the mathematician did not take into account much, made a number of mistakes, described the more outdated Venetian system, and not the progressive Florentine one. However, Luca Pacioli's "Treatise" showed that a scientific approach can also be applied in the preparation of financial statements. He was able to turn the formation of balance into one of the areas of the exact sciences. This, in turn, caused many people (Leibniz, Cardano and others) to become interested in the theory of accounting.

Introduction of the mathematical system

In his"Treatise" Pacioli supplemented the existing methods with ideas about combinatorics. In drawing up the balance at that time, fractions were used due to the simultaneous use of several currencies. But during operations they were simply rounded off. However, the main contribution of the mathematician to the methodology is considered to be his introduction of the idea of the integrity of the accounting system and that the balance convergence acts as a sign of its harmony. The latter definition was considered at that time not only as an aesthetic, but also an engineering category. The assessment of the trade balance from this position made it possible to present the enterprise as an integral system. The method that Luca Pacioli perfected - double entry - in his opinion, should have been applied not only to a particular commercial enterprise, but to any organization and to the entire economy as a whole. This allows us to conclude that the approach that the mathematician introduced predetermined not only the development of financial reporting, it became the foundation for the formation and subsequent implementation of economic thought.

Luca Pacioli: "Treatise on accounts and records" (summary)

First of all, it should be said that the mathematician's financial balance is presented as a strictly ordered sequence of operations. The most complete reflection of "procedure" can be seen in the principle of maintaining three accounting books. The first - "Memorial" - reflects the chronological sequence of all cases. The sixth chapter of the "Treatise" describes the order of its conduct. Over time, the Memorial was replaced by primary documents. As a result, there was an inconsistency between the dates of the statement, the transaction and the registration of the fact.

The next book is "Journal". It was intended exclusively for internal use. It recorded all the transactions that were described in the "Memorial", but at the same time their economic meaning (loss, profit, and so on) was taken into account. It was intended for postings and was also compiled in chronological order. The third book was "The Main". It is described in the 14th chapter of the "Treatise". It recorded transactions in a systematic rather than chronological order.

Clarity

This is the next principle that was described by Pacioli. Clarity meant providing users with clear and complete information about the economic activity of the enterprise. All entries in books, in accordance with this principle, should be compiled in such a way that they provide for a conceptual reconstruction. In other words, transactions must be recorded in such a way that later it would be possible to restore the participants in the act, the objects, the time and place of the fact. To achieve the greatest clarity, knowledge of the language of accounting is necessary. The mathematician used the Venetian dialect when writing the book, and used mathematical concepts everywhere. It was Pacioli who formed the prerequisites for the creation of the accounting language, which was the most understandable for most Italian financiers.

Inseparability of the property of the owner and the enterprise

This principle was quitenatural. The fact is that many merchants then acted as the sole owners of the enterprise, managers and recipients of losses and profits from trading activities. In accordance with this, accounting is carried out in the interests of the owner of the company. However, in 1840, Hippolyte Vanier formulated another approach. In accordance with it, accounting is conducted not in the interests of the owner, but of the company. This approach reflected the spread of equity capital among the masses.

Credit and debit

One of Pacioli's most important principles was dual notation. The mathematician adhered to the position that each business transaction should be reflected both in debit and in credit. This approach has the following goals:

1. Control over the correctness of recording the facts of economic activity.
2. Establishing the size of the owner's capital without inventory.
3. Determining the financial result.

In his work, Pacioli paid much attention to the first task. At the same time, the second and third remained undeveloped. This leads to the formation of a method that distorts the correctness of the turnover. The fact is that Pacioli was first of all a scientist, and then a financier, therefore he considered the double entry system within the limits of a causal relationship. In the debit, presumably, the mathematician saw the cause, and in the credit, the consequence. This way of looking at the financial system has primarily found application in economics. The most succinct formulation of this principle was given by Ezersky: withoutexpenses cannot be income. Pacioli took the following as the main aspects of dual notation:

1. The amount of debit turnover will always be identical to the amount of credit.
2. The value of debit balances will always be identical to the value of credit.

These principles subsequently became widespread in accounting systems.

Subject of reporting

Pacioli used it as the execution of the contract of sale. The reduction of all agreements to a document of this type was quite typical for that time. Undoubtedly, today's variety of forms of economic life cannot fit into the framework of the concept of sale and purchase (for example, offsetting, barter, debt restructuring, and so on). However, in the time of Pacioli, such a representation was very progressive. In addition, this approach made it possible to form an adequate definition of value for that period as not only a fair price, but also a consequence of the cost price and the situation on the market.

Adequacy principle

Its essence lies in the fact that all the costs incurred by the enterprise are correlated over time with the income received by it. Pacioli's principle of adequacy presupposes rather than introduces directly and explicitly. Only the money received is considered as income. At that time, the concepts of profitability and depreciation had just begun to form. Together, all this contributed to the creation of ideas about both monetary and other forms of profit. According to the new understanding of income, one cansay that it is formed not only as a result of business operations, but also as a result of the application of accounting methodology.

Balance Management

Pacioli considered accounting to be something intrinsically valuable, in connection with this, the value of the results of reporting acted as a relative concept. The results recorded in one or another book depend largely on the method of reporting. This provision is consistent with the idea of the most accurate recording of business transactions in the balance sheet, since all methods imply a fairly accurate reflection of the facts, while the conclusions can often be directly opposite. Pacioli understood this very well. In this regard, he saw its impact on decision-making in the field of economic management as the main result of financial reporting.

Honesty

This is the last principle that Pacioli proclaimed in his "Treatise". A person who balances things must be absolutely honest. This should be manifested not only in relation to the employer himself. An accountant should be mostly honest with God. In this regard, relying on him in almost every chapter for a mathematician is neither a tribute to tradition, nor the fulfillment of a monastic duty, but the main principle of life. Pacioli considered the deliberate distortion of accounting information not only as a financial violation. For the mathematician, this was primarily a disorder of the divine harmony, which he sought to comprehend through calculations.

Flaws of the job

It should be said that Pacioli's work was primarily a theoretical book. As such, it does not reflect many elements of the financial statements that existed at the time. These include, in particular:

1. Maintaining additional and parallel books.
2. Industrial cost accounting.
3. Balancing for analytical purposes. At that time, reporting was already carried out not only to reconcile information and close books, but also acted as a management and control tool.
4. Maintaining nostro and loro accounts.
5. Basics of the audit and the procedure for checking the balance.
6. Calculation methods relating to the distribution of profits.
7. Procedure for reserving funds and distributing results over adjacent periods.
8. Confirmation of reporting information by inventory methods.

The absence of these components indicates, first of all, Pacioli's lack of commercial experience. It is likely that he did not include the details given because they simply did not fit into the coherent system he created.

In closing

Pacioli's work was one of the first to use the Italian language as a means of expressing a scientific idea. The principles and categories formed by the mathematician are still being applied today. The main merit of Pacioli is not that he fixed them - after all, it would have been done that way. His contribution is that it was thanks to his book that accounting was elevated to the status of a science.