Table Of ContentORIGIN AND EVOLUTION
OF DOUBLE ENTRY BOOKKEEPING
Origin and Evolution of
Double Entry Bookkeeping
A STUDY
OF ITALIAN PRACTICE
FROM THE FOURTEENTH CENTURY
8p Edward Peragallo, Ph.D.
WITH A FOREWORD BY ROBERT H. MONTGOMERY
NEW YORK
AMERICAN INSTITUTE PUBLISHING COMPANY
1938
9
Copyright 1938 by American Institute Publishing Company,Inc. -3
Printed in the United States ofAmerica 14
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TO MY MOTHER
FOREWORD
» HEprincipalvalueoftheStudywhich Mr. Peragallohas
made is that it establishes beyond dispute two things:
first, that by its very nature accounting adaptsitself to
business procedure, not business to accounting proce-
dure; and, second, thatforcenturiesafterthefirstsigns
ofdouble entryappeared, accountants andteachers and
writers of accounting were concerned, not with theory,
Y but exclusively with business transaétions and their
description in the accounts. Accounting theory first appeared in the nineteenth
century, and there followed an epidemic of so-called systems of bookkeeping—
most ofthemfantastic and utterly uselessfor practicalpurposes.
To theprattitioner who looks upon his workas the syStematic application of
knowledge andskill in effecting a desired result,it is clear thatto attribute to his
methods the inviolability ofnatural laws would hinderratherthan help him in his
searchfortruth andstuntthegrowthofanartalready hardpressedtoadaptitself
tothe increasingdemandsofbusiness. Thereisreasontofearthatsome in author-
ity have such a misunderstanding of the nature of accounting; this is the only
conclusion which can be drawnfrom their tendency to expeét business to conform
to an accountingpattern rather than the reverse.
At its present Stage of development, accounting, although still far from
perfect, servesremarkablywellthepurposeforwhich it has always beenintended.
Accounting is the language offinance — a universal language. It is concerned
not with the eternalverities, but with the data immediately before it. These data
arenotpreciselymeasurablewiththerule, thescales, oranyinstrumentyetdevised
by man. They can be measured only to the extent that human nature can be
measured, for the value of every item in financial accounts is contingent upon a
varying and illusive humanfattor. AccountingStatements and reports are neces-
sarily expressions of opinion, and no better than the ability and judgmentof the
accountants who prepare them.
Accounting methods which have endured are those which have met the test
ofthe pragmatists — how well do they serve the given purpose? Accounting has
but one purpose, to set forth the results of business operations accurately and
truthfully. It draws upon the resources of many sciences, but remains an art,
varying in effectiveness with the knowledge and skillofthepractitioner — this is
the lesson of history.
Robert H. Montgomery
Preface
“yHE vastness of the subject has made it necessary for meto limit
my study of the origin and subsequent developmentof double-
entry bookkeeping to events occurring in Italy, where the
system originated some time during the thirteenth or fourteenth
centuries. The art of bookkeeping was confined to Italy until
yay DMO che sixteenth century, and then, following in the wake oftrade,
it spread throughout Europe. Theparts of this book, therefore, dealing with the
period when bookkeeping was exclusively an Italian art, view the field as a
whole, while those parts which deal with subsequentyears are a partial treatment.
It should be borne in mind, however, that the Italian system of double entry to a
large extent determined practice in the rest of Europe; it was not until the eight-
eenth centurythat Italy experienced any serious rivalry in thefield, and ultimately
it was double entry, as developedin Italy, chat endured.
The book has been arranged so that examples in a foreign language, set in
italic type, are followed immediately by a translation in roman type. Notes to
which references appear in the text are placed at the end of each chapter.
I am deeply indebted to Professor Roy B. Kester and Professor Archibald H.
Stockder for their generous advice, readings of the manuscript, and valuable
criticisms; also to Professor Henry Rand Hartfield, Professor Thomas W. Byrnes,
and Professor Lynn Thorndike for their reading and helpful criticisms of the
manuscript; and to Walter Hausdofer, the librarian of the School of Business at
Columbia University, for invaluableaid in locating and selecting source material.
To Charles M. Smith, associate editor of the American Institute Publishing
Company, I am deeply obligated for his painstaking efforts in organizing the
book and improving the style. To Colonel Robert H. Montgomery | am
especially grateful for his interest in my work andfor the extensive use I made of
the colledion of ancient accounting manuscripts which he donated to the
Business School Library ac Columbia University.
Edward Peragallo
Swe
4 CONTENTS Se
CIRM
Part I
THE ORIGIN OF DOUBLE ENTRY
Introduction
Genoa
Florence 18
Venice 32
Florentine Industrial Accounting
Part IT
THE LITERATURE OF ACCOUNTING
The First Cycle (1458-1558)
Benedetto Cotruglio Raugeo 54
Fra Luca Paciolo 55
Domenico Manzoni 60
Gerolamo Cardano 66
Alvise Casanova 66
Giovanni Antonio Tagliente
Anonymous Writers 72
Bartolomeo Fontana 72
Conclusion 73
The Second Cycle (1559-1795)
Don Angelo Pietra
79
Grisogono Simon 81
Giovanni Antonio Moschetti 81
Matteo Mainardi 82
Ludovico Flori 82
Giovanni Domenico Peri
Bastiano Venturi go
Giacomo Venturoli go
Antonio Zambelli go
Onofrio Sbernia Pugliesi
gl
ORIGIN AND EVOLUTION OF DOUBLE ENTRY BOOKKEEPING
Ludovico Corticelli
gl
Giacomo Della Gatta
gL
Balugani Pellegrino
gt
Tomaso Domenico Breglia
gl
Pietra Paolo Scali
gl
Guiseppi Forni
92
Conclusion
92
The Third Cycle (1706 To Date)
THE EMERGENCE OF ACCOUNTING THBORY
The Ancient Writers
98
Dégrange and the Cinquecontisti School
99
Francesco Villa and the Lombard School
1dl
Hippolyte Vannier
LOL
Francesco Marchi
|
102
Giuseppe Cerboni
103
Fabio Besta
105
THEORIES OF DOURLE ENTRY
Rudimentary Theories
107
Theoties Based on Indudive Logic
LOT
Theories Based on the Interrelation of Accounts
108
Personalistic Theories
108
The Value Theory
109
METHODS OF DOUBLE ENTRY
The Methods of Dégrange
ill
The Methods of Villa and Marchi
112
Logismography
112
Besta and Modern Practice
120
Part III
THE FUNCTIONAL DEVELOPMENT OF DOUBLE ENTRY
The Ledger
127
The Journal
i321
Financial Statements
136
Bistiocraray
143
Invex
151
PART I
THE ORIGIN OF DOUBLE ENTRY
INTRODUCTION
GENOA
FLORENCE
VENICE
FLORENTINE INDUSTRIAL ACCOUNTING
Part I
THE ORIGIN OF DOUBLE ENTRY
INTRODUCTION
SEZ ECAUSEof the paucity of recorded faéts, there are many
theories but very little certainty as to the origin of double-
entry bookkeeping. Students of the subject, in an endeavor
to give due credit for the invention of the syStem, offer a
wide range of possibilities. Some are inclined to give full
credit toone man — Paciolo, who perhaps more frequently
yA than any other has been named as the author of double
(SSB ARS entry, but the weight of evidence now seems to be against
this theory. Others have attempted to trace the origin of double entry to ancient
Rome and Greece. Recent Students, however, believe that the syStem originated in
a
Italy during the thirteenth and fourteenth centuries, and are concentrating their
efforts upon determining the exaét locality of its origin.
It should be borne in mind that systems of bookkeeping come into being because
of the necessity of recording transaétions arising out of commerce, industry, and
government. Bookkeeping is, therefore, dependent on these transactions for its
existence, and any changes it undergoes are probably best explained in the light
of the changes that occur in business methods. Because of this, double-entry
bookkeeping may ultimately be found to have had relatively independent origin
in many localities and to have been first applied to various types of business
activities at almost the same time.
It is the purpose of this work to Study some of the changes in the procedureof
Italian record keeping that led progressivelyto the origin of the double-entry system
and determined the course of its subsequent evolution.
Medieval bookkeeping developed from humble beginnings. At first business
transactions, along with other social or political events, were entered in what
might be described as a diary, but with the rise of commerce this crude method of
record keeping had to give way to a moreefficient system. The first double-entry
book to appear wasthe ledger. It had the accounts divided bilaterally or vertically,
and was supported by numerous memorandum books. The ledger probably devel-
oped fromthe debtor and creditor relationships of merchants. It is possible that,
with the revival of Medieval commerce and with the increasing importance of
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