The Invention of Double Entry Bookkeeping

Alan Sangster

University of Aberdeen, U.K.

(alan.j.a.sangster@gmail.com)

CAN YOU TRUST WHAT YOU READ?

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Double Entry serves needs

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Double Entry serves needs

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14th century – shift to sedentary – DEB used to monitor and control distant agents, partners, and managers

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14th century – permanent partnerships – DEB used to provide reports to owners

Needs of Owners

Only in Tuscany

Needs of Business

Double Entry serves needs

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Early 13th century – credit – DEB used to avoid financial risk

14th century – shift to sedentary – DEB used to monitor and control distant agents, partners, and managers

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14th century – permanent partnerships – DEB used to provide reports to owners

Needs of Business

Needs of Owners

Double Entry serves needs

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Early 13th century – credit – DEB used to avoid financial risk

14th century – shift to sedentary – DEB used to monitor and control distant agents, partners, and managers

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14th century – permanent partnerships – DEB used to provide reports to owners

Needs of Business

Needs of Owners

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There is still not a satisfactory explanation for the emergence of double-entry bookkeeping in Italy in the thirteenth century.

(Dobie & Oldroyd 2020)

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There is still not a satisfactory explanation for the emergence of double-entry bookkeeping in Italy in the thirteenth century.

(Dobie & Oldroyd 2020)

All that is needed to explain this is to know when and where it emerged

and

knowledge and understanding of context

CONTEXT

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CONTEXT: CREDIT

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8th to 19th century

INSUFFICIENT COINS & BULLION TO SUPPORT EXPANSION OF TRADE

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8th to 19th century

INSUFFICIENT COINS & BULLION TO SUPPORT EXPANSION OF TRADE

BUT, TRADE DID EXPAND

FROM LOCAL TO REGIONAL TO INTERNATIONAL

BEFORE 1300

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“Adolf Schaube, to whom economic history perhaps owes its existence as an independent discipline” (Raymond de Roover 1969).

Adolf Schaube, economic historian (1906)

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Of the greatest importance, however, was the use of another means [of settlement]…

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there is no doubt that this equalization by credit was largely intended to replace cash payment when cash was scarce and inadequate

Adolf Schaube, economic historian (1906)

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Of the greatest importance, however, was the use of another means [of settlement]… that was the general spread that bookkeeping had found among the businessmen of the time.

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there is no doubt that this equalization by credit was largely intended to replace cash payment when cash was scarce and inadequate

The Florentine bank ledger of 1211

Adolf Schaube, economic historian (1906)

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Of the greatest importance, however, was the use of another means [of settlement]… that was the general spread that bookkeeping had found among the businessmen of the time.

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The fragments of the Florentine account book from the year 1211 show us the system in its fullest development,

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there is no doubt that this equalization by credit was largely intended to replace cash payment when cash was scarce and inadequate

Adolf Schaube, economic historian (1906)

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Of the greatest importance, however, was the use of another means [of settlement]… that was the general spread that bookkeeping had found among the businessmen of the time.

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The fragments of the Florentine account book from the year 1211 show us the system in its fullest development,

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[and] show us the utilisation in the most general practice, payment instructions to third parties and through third parties, transfers of assets, mediation of payments by other people, etc.;

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there is no doubt that this equalization by credit was largely intended to replace cash payment when cash was scarce and inadequate

Mario Chiaudano, historian of law and business (1930)

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Also, the formal aspect of accounting, with the reference from one account to another and the double entries to credit and to debit presents a system that is already almost perfect…

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[the Florentine account book presents] undoubtedly the first germs of double entry records that will develop and improve over the course of the 14th and 15th centuries.

The Florentine bank ledger of 1211

CONTEXT: STATUTES

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Pietro Santini, philologist and historian (1887)

since the laws determined the rules to be followed in the compilation and maintenance of commercial books, it is clear that the jurists from 1211 considered valid, for the judicial effects in commercial matters, a document written in [the spoken language].

And since these fragments have a very developed form, which cannot be believed to have been formed there and then, it is natural to hypothesise that the bank book written in [that language], as we have it in 1211, already existed in the twelfth century.

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Between 1150 and 1400 Sweden was transformed from a society which was predominantly reliant on oral communication into a society which increasingly deployed writing. Latin, the traditional language of government and records, was gradually replaced by vernacular Swedish. The watershed moment in this process was the drafting of national and town laws in the 1350s, an event which established Swedish as the language of the judiciary and judicial records. From this period written documentation was gradually integrated into legal procedure.

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Pragmatic Literacy argues that the Crown, the expanding bureaucracy, the editing of the laws in Swedish, and the laws' demands for written documentation in everyday transactions were the main driving forces behind the development in medieval Sweden of lay literacy for practical purposes.

This statement by Santini was ignored.

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Pietro Santini, philologist and historian (1887)

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Why?

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These views of Schaube and Chiaudano were ignored.

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Adolf Schaube, economic historian (1906/1915)

Mario Chiaudano, historian of law and business (1930)

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Why?

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The BIG problem of definition

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BOOKKEEPING: The skill or occupation of maintaining accurate records of business transactions.

BOOKKEEPING: The skill or occupation of maintaining accurate records of business transactions.

DOUBLE ENTRY BOOKKEEPING: The recording of the equal financial effect of transactions on the two elements of those transactions: the item exchanged and the form of settlement, one as a debit and the other as a credit, PLUS the inclusion in each entry of the location of the contra entry.

BOOKKEEPING: The skill or occupation of maintaining accurate records of business transactions.

DOUBLE ENTRY BOOKKEEPING: The recording of the equal financial effect of transactions on the two elements of those transactions: the item exchanged and the form of settlement, one as a debit and the other as a credit, PLUS the inclusion in each entry of the location of the contra entry.

DOUBLE ENTRY BOOKKEEPING SYSTEM: A bookkeeping system in which all transactions recorded are entered in double entry

BOOKKEEPING: The skill or occupation of maintaining accurate records of business transactions.

DOUBLE ENTRY BOOKKEEPING: The recording of the equal financial effect of transactions on the two elements of those transactions: the item exchanged and the form of settlement, one as a debit and the other as a credit, PLUS the inclusion in each entry of the location of the contra entry.

DOUBLE ENTRY BOOKKEEPING SYSTEM: A bookkeeping system in which all transactions recorded are entered in double entry

ACCOUNTING: The process of taking the information from the bookkeeping system and using it to produce financial reports.

How accounting history identifies use of double entry

How accounting history SHOULD identify use of double entry

Raymond de Roover (1956)

• Under the influence of Fabio Besta, whose treatise first appeared in 1909, the older writers attached much importance to the matter of form and procedure

Raymond de Roover (1956)

• Under the influence of Fabio Besta, whose treatise first appeared in 1909, the older writers attached much importance to the matter of form and procedure, whereas the younger generation places greater emphasis on accounting as a tool of management and control.

Raymond de Roover (1956)

• Under the influence of Fabio Besta, whose treatise first appeared in 1909, the older writers attached much importance to the matter of form and procedure, whereas the younger generation places greater emphasis on accounting as a tool of management and control.
• While I fully sympathise with this new approach to accounting history, I also believe that form and procedure are not completely devoid of significance and should not be entirely overlooked.

Raymond de Roover (1956)�defining double entry

• A necessary prerequisite is that all transactions be recorded twice, once on the debit and once on the credit side.
• This principle also involves the existence of an integrated system of accounts, both real and nominal, so that the

(1) books will balance in the end,

(2) record changes in the owner's equity and

(3) permit the determination of profit or loss.

Raymond de Roover (1956)�defining double entry

• A necessary prerequisite is that all transactions be recorded twice, once on the debit and once on the credit side.
• This principle also involves the existence of an integrated system of accounts, both real and nominal, so that the

(1) books will balance in the end,

(2) record changes in the owner's equity and

(3) permit the determination of profit or loss.

This conflates bookkeeping and accounting

In the accounting history literature,

Bookkeeping ≡ Accounting

In the accounting history literature,

Bookkeeping ≡ Accounting

Why?

Raymond de Roover (1958)

Medieval bookkeepers often did queer things.

Perhaps they had good reasons for doing what they did,

but we no longer understand their practices

because we have a different point of view

and accounting has progressed since the Middle Ages

Raymond de Roover (1958)

Medieval bookkeepers often did queer things.

Perhaps they had good reasons for doing what they did,

but we no longer understand their practices

because we have a different point of view

and accounting has progressed since the Middle Ages

This is WHY the definition of DEB used by accounting historians conflates bookkeeping and accounting – doing so allows them to be Whiggish and focus on financial statements.

Whiggish History

Whiggish history views history as inevitable progress and improvement.

It sees the present and looks for signs of progress towards it in the past.

It is often adopted in response to a lack of knowledge and understanding of the context, surrounding evidence, action, or practice located in the past.

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Problems in the Medieval AH Literature of Italy

Seminal research done Whiggishly pre-1930

Recognised as “perfect”

Not contested

Not critiqued

Accepted as fact

Relied upon exclusively – alternatives rejected

Challenges: rebutted and ridiculed

Problems in the Medieval AH Literature of Italy

Seminal research done Whiggishly pre-1930

Recognised as “perfect”

Not contested

Not critiqued

Accepted as fact

Relied upon exclusively – alternatives rejected

Challenges: rebutted and ridiculed – Astonishing!

Problems in the Medieval AH Literature of Italy

Seminal research done Whiggishly pre-1930

Recognised as “perfect”

Not contested

Not critiqued

Accepted as fact

Relied upon exclusively – alternatives rejected

Challenges: rebutted and ridiculed – Astonishing! Outrageous!

Problems in the Medieval AH Literature of Italy

Seminal research done Whiggishly pre-1930

Recognised as “perfect”

Not contested

Not critiqued

Accepted as fact

Relied upon exclusively – alternatives rejected

Challenges: rebutted and ridiculed – Astonishing! Outrageous!

“it is done, we know everything”

A Confusing Literature

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Hoskin & Macve (1986) wrote:

• the invention of a particular accounting system, double-entry… in the thirteenth and fourteenth centuries, and
• the much later… development of… accountancy, in the nineteenth century, wherein the double-entry system gains wide­spread adoption

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Literature that says one thing but appears to mean another

Hoskin & Macve (1986) wrote:

• the invention of a particular accounting system, double-entry… in the thirteenth and fourteenth centuries, and
• the much later… development of… accountancy, in the nineteenth century, wherein the double-entry system gains wide­spread adoption

Dobie & Oldroyd (2020) wrote:

• Single-entry accounting seems to have remained the norm in Britain even among large organisations until at least the nineteenth century (Hoskin and Macve 1986).

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Literature that says one thing but appears to mean another

Hoskin & Macve (1986) wrote:

• the invention of a particular accounting system, double-entry… in the thirteenth and fourteenth centuries, and
• the much later… development of… accountancy, in the nineteenth century, wherein the double-entry system gains wide­spread adoption

Dobie & Oldroyd (2020) wrote:

• Single-entry accounting seems to have remained the norm in Britain even among large organisations until at least the nineteenth century (Hoskin and Macve 1986).

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This cannot be correct

Editions of bookkeeping manuals published 1501 to 1800 (Source: Jeannin 1991)

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Editions of bookkeeping manuals published 1501 to 1800 (Source: Jeannin 1991)

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Average edition size for books published in London in 1575 = c.620

413 times 620 = 256,000 copies (1601-1800)

Editions of bookkeeping manuals published 1501 to 1800 (Source: Jeannin 1991)

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Taking the minimum for 1690-1699 (Dittmar 2012)

365 editions (1701-1800) times 1200 = 438,000 copies

Editions of bookkeeping manuals published 1501 to 1800 (Source: Jeannin 1991)

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Taking the minimum for 1690-1699 (Dittmar 2012)

365 editions (1701-1800) times 1200 = 438,000 ÷2 = 219,000 copies

Editions of bookkeeping manuals published 1501 to 1800 (Source: Jeannin 1991)

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Taking the minimum for 1690-1699 (Dittmar 2012)

175 single edition titles + 15 multiple edition titles

= 190 titles (1701-1800) times 1200 = 228,000 copies

Separate Bookkeeping from Accounting and clarity begins to emerge.

The Florentine bank ledger from 1211 is in double entry

but, accounting historians could not see it

The views of Santini, Schaube, and Chiaudano were ignored.

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Pietro Santini, philologist and historian (1887)

Adolf Schaube, economic historian (1906/1915)

Mario Chiaudano, historian of law and business (1930)

​

The views of Santini, Schaube, and Chiaudano were ignored.

​

Pietro Santini, philologist and historian (1887)

Adolf Schaube, economic historian (1906/1915)

Mario Chiaudano, historian of law and business (1930)

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Why?

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Accounting historians were looking for financial statements and capital accounts showing changes in equity

How accounting history identifies use of double entry

How accounting history identifies use of double entry

How accounting history SHOULD identify use of double entry

How accounting history SHOULD identify use of double entry

Finally

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There is still not a satisfactory explanation for the emergence of double-entry bookkeeping in Italy in the thirteenth century.

(Dobie & Oldroyd 2020)

71

There is still not a satisfactory explanation for the emergence of double-entry bookkeeping in Italy in the thirteenth century.

(Dobie & Oldroyd 2020)

All that is needed to explain this is to know when and where it emerged

and

knowledge and understanding of context

72

There is still not a satisfactory explanation for the emergence of double-entry bookkeeping in Italy in the thirteenth century.

(Dobie & Oldroyd 2020)

All that is needed to explain this is to know when and where it emerged

and

knowledge and understanding of context

CONTEXT: CREDIT & STATUTES

A satisfactory explanation for the emergence of double entry bookkeeping in Italy in the thirteenth century

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A satisfactory explanation for the invention of double entry bookkeeping in Italy in the thirteenth century

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Double Entry serves needs

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Needs of Business

Early 13th century – credit – DEB used to avoid financial risk

​

A satisfactory explanation for the invention of double entry bookkeeping in Italy in the thirteenth century

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