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Jacob Soll: The Reckoning: Financial Accountability and the Making and Breaking of Nations.

Jacob Soll

The Reckoning: Financial Accountability and the Making and Breaking of Nations, Allen Lane, Penguin Books Ltd: London, 2014, 276 + xvii pp: ISBN: 9781846146411

Professor Soll proposes that those who do not maintain a financial reckoning of their activities will ultimately perish and cites Louis XIV, the 'Sun King' of France, in the Introduction to this book as an example of what happens when a reckoning is not kept. Then, in a chronological sequence of 13 numbered chapters he shifts from the earliest reckonings of millennia BCE through the Middle Ages and medieval period, past the industrial revolution, to the present day. At each point, he indicates what he believes are the crucial forms of reckoning taking, or not taking place. In Chapter 1, he sets the scene for the rest of the book, rapidly moving from reckonings of inventories in Mesopotamia to Sumerian clay tokens used in 3,500 BCE to record goods shipped and received, and inventories, auditing in Babylonia in 1772 BCE, Greek and Roman accounting and accountability whereby we are told, in the case of the latter, it was the auditors of the public coffers who managed the Republic and Early Roman Empire.

Fraud in Roman times is highlighted, particularly that of Mark Antony. The accusation levelled against him by Cicero is used to draw our attention to the view that powerful people are not the most receptive to requests for their books to be opened for inspection. Professor Soll then denounces Marc Antony as both a bad bookkeeper and a bad general who was removed by the future Emperor Augustus, a man who was good at both and who believed in making public his reckonings and the sources and uses of the funds involved, a practice that continued for 300 years. As the Empire slowly declined, so did the openness and extent of its accounting, with its maintenance shifting from professional administrators to nobles. Publication of the Empire's finances was no longer considered appropriate and, by the end of the Empire, audits were no longer possible. Thus, the scene is set in the rest of the book for a sequence of events that resonate in one way or another with the fate of Marc Antony and, ultimately, the Roman Empire. Throughout the book, the underlying hypothesis is that it is the existence of these reckonings that 'makes' people, businesses, and states; and that the absence of such reckonings leads, ultimately, to disaster. Auditing does not play such a significant part in the tale that is told but, from time to time, it is identified as something that is necessary for true accountability to exist.

The content of this book represents an appropriate, if selective, range of relevant historiography ranging from kings to bankers to politicians to merchants to writers to early international companies to modem multi-nationals, the accounting profession, and its regulation. On the whole, it is written in a way that is accessible to anyone with an interest in the history of public reckonings irrespective of whether or not they understand anything of accounting or of commercial, economic, or political history. But, is it good value? Is it a 'well-researched book', or is it just a book that many people would find interesting to read? There are some elements in the book that suggest to me that it is the latter.

In considering the merits of any factual book, it is important that the facts selected stand-up to scrutiny. If too many do not, the credibility of the rest of the text is undermined. In this respect, Professor Soll is, at the very least, inconsistent, particularly when dealing with Renaissance Italy, and especially in his material on Francesco di Marco Datini, the 14th and 15th century 'Merchant of Prato' and on Luca Pacioli, the first person to print a text on how to do double entry bookkeeping, in 1494. The portrayal of Datini is far from accurate and, in places, presents a picture of his approach to business that is the complete opposite of what it was. In the eight pages on Pacioli, as shown in the Appendix to this review, there are over 40 errors of fact or interpretation. These two topics represent only 3 per cent of the text but they may be symptomatic of a rather under-researched foundation where old and set-aside findings are given credence and speculative assertions are treated as facts. There is a surprising casualness and inconsistency in some of the statements made, and the overall impression is of a job done swiftly and with little attempt made to ensure the views reported are current--in other words, that they would be considered today to be correct.

In any book, we should also expect clarity when the context changes, making it clear that something different is being considered. In this respect, what frustrated me most in this book was that, despite 17 pages being devoted to 16th and 17th century Dutch accounting in Chapter 5, no attempt is made to distinguish between the Italian method of double entry bookkeeping and Hanseatic (or 'factor' or 'agent') accounting, a totally different form of bookkeeping involving dual entries but with completely different objectives that did not include the calculation of profit or of wealth, and included no accounts for capital, profit and loss, or non-current assets. This was the dominant form of bookkeeping in use there at that time. Instead, the discussion of Dutch bookkeeping in the first few pages of this chapter, in which bookkeeping manuals on both forms of bookkeeping are all treated as if they were on double entry, creates an erroneous impression that it is double entry that is being discussed whenever accounting is mentioned. When the discussion shifts to the United Dutch East India Company and its lack of financial transparency, the statement that it "never instituted double entry", made in the final paragraph about the company on page 84, is six pages too late, and not entirely correct, for it did in some parts of its business, particularly in its Asian Office (Robertson 2011, p. 398). Had the company's principal use of something akin to Hanseatic accounting been acknowledged at the outset, there would be no mystery in why it failed to deliver the financial transparency its shareholders sought. The end result is a chapter that misleads and misses an opportunity to include an example in this book of an alternative method of maintaining a reckoning to those of single and double entry, which are implicitly or explicitly involved throughout the rest of the text.

Some throwaway lines are presented in this book that are simply wrong, such as the statement that double entry bookkeeping was essential for those operating in the international slave trade (p. 155); that accounting standards existed in the 19th century (p. 165); and that the International Accounting Standards Committee was founded in 1957 by the Treaty of Rome (p. 194). Professor Soll also completely fails in his attempt to use an example to describe double entry (p. xv) and defines depreciation as, "the costs of maintenance over time" (p. 174), which even most sophomore accounting students would likely tell you, it is not.

In addition, there is an over-statement of the role of double entry bookkeeping in national accounting prior to relatively modem times that is, as with these errors and misunderstandings, irritatingly misleading.

My unease is compounded by the adoption of an endnote-based citation system that, from-time-to-time, could be mistaken for papering-over any lack of sources for statements made. The result is far from ideal, leading to assertions being disguised as facts that are unsupported by the evidence presented; and by misdirections to indicated sources that contain little of the supporting material the reader might expect to find. For example, endnote 3 on page xv gives two sources to support the 19-line paragraph to which it is appended. The second of these cites the first and what is covered in both cited sources fails to support more than a fraction of the text to which it is linked.

Elsewhere, the brief coverage of inflation accounting on page 196 is undermined by the author's lack of understanding of depreciation. In a book which discusses and presents examples of how reckonings may be produced and utilised to demonstrate good governance or manipulated to hide bad governance or bad stewardship, it is surprising that Professor Soll does not appear to understand a basic accounting adjustment of financial data that is routinely undertaken by accountants and that is one of the easiest methods by which earnings can be managed and financial reckonings misaligned with reality.

I also had difficulty with some of the writing where a bit more care in the sequence in which material is presented would have eliminated distracting jumps forwards and backwards in time within chapters. A bit more care in editing would also have helped avoid errors such as describing Pacioli on page 48 as a Dominican friar and, two paragraphs later, describing him as a Franciscan.

Regretfully, some opportunities are lost, such as the absence of any attempt to describe the publication in 1781 of Jacque Necker's Compte Rendu au Roi as having established a justifiable cause for the French Revolution. If this was not both a 'reckoning' of account and the catalyst for a far more sinister 'reckoning' in the sense of a come-uppance, what was, and what is? While this connection is highlighted on the dust wrapper of the book--"[it] helped to fuel the French Revolution"--it is only noted that it "played a role in the French Revolution" in the text which, instead, focuses on Necker's popularity as a result of publishing it rather than upon the impact its revelations may have had upon public perception of the state.

Does this book actually address the issue in its title: financial accountability and the making and breaking of nations? In some cases, no, partly because the focus is often elsewhere and partly because misunderstandings and a lack of clarity confound any attempt to do so, such as in the case of Chapter 5 ('The Dutch Audit'). Some chapters do, however, successfully address the subtitle of the book: the two 'French' chapters, 6 and 9; chapters 7 (about the British--not "English"--restructuring of credit markets and use of a Sinking Fund to manage the national debt); 10 (about the founding of the United States); 11 (about the US railroads in the 19th century); 13 (the development of modern professional accounting practice, regulation, and auditing) and the Conclusion, though I did find Chapter 13 too parochial and too ignorant of events outside the United States.

CONCLUSION

I began this book with high hopes. Before I was half-way through, I felt disappointed and frustrated and unsure whether I could trust what I had yet to read. Nevertheless, once the focus moved to France, it contains a large amount of interesting and thought-provoking material that, for me, was the best part of the book.

I cannot disagree that accounting plays a large role in effective bureaucracy and democratic accountability--accounting enables the reckoning to be made. And I am bound to agree with the hypothesis that a reckoning is, in principle, a good thing, that history shows the importance of systematic accountability for good governance and good government. However, like freedom and democracy, it is easily lost when those who are in a position to undertake such an exercise choose not to continue to do so, or do so in a way that circumvents the truth in pursuit of something more palatable to those to whom it is presented. Professor Soll's hypothesis is rational and consistent with others, such as that presented by Francis Fukuyama (2014), but he is more convincing for me on this point when he drifts into personal, domestic, and business accounting than in his coverage of government accounting.

There is a dissonance in Professor Soll's view of the role of double entry bookkeeping, not just because he does not appear to understand what it is or how it works, but because he has failed to engage with the extensive academic arguments on its role. While Basil Yamey is referenced frequently, particularly his book on accounting and art, the debate on the purpose and benefits of using double entry to which Yamey, Raymond de Roover, Frederick Lane, Edward Peragallo, A.C. Littleton, Alvaro Martinelli, Esteban Hernandez-Esteve, Richard Mattessich, Richard Macve, Dick Fleischman, Yanick Lemarchand, Chris Nobes, Lucia Lima Rodrigues, Richard Goldthwaite, Jane Gleeson-White, and many others have contributed is sadly overlooked or referred to in passing without truly engaging with the text, as is virtually all the Italian literature other then Pacioli's instructional text of 1494 and Manzoni's of 1540. One of the most striking examples of a failure to engage with this literature concerns what was said on this topic by Dominico Manzoni in 1540: Professor Soil cites the Preface to Manzoni's book (footnote 3, page xv) but does not mention that Manzoni states on that page that double entry is "not only useful, it is necessary to every Republic", a strange omission in the context of the theme of this book.

Nor has Professor Soll engaged with the arguments about what societies could and could not do about measuring profits and the state of affairs before and after the emergence of double entry, nor of the difficulties that European governments faced when they tried to adopt double entry in their administration up to the 19th century. Double entry is a technical tool that emerged initially by chance, then by conscious effort when contra entries were signposted. It helped maintain some control over what was recorded, and still does and, at the same time facilitates checking of accuracy and completeness. Profit is revealed as a balancing entry because somewhere was needed to put the difference between cost and income, not because someone decided they needed to identify profit. Some found that useful, some, like the United Dutch East India Company, did not, why? Because being able to calculate profit or financial position was not necessarily something everyone who maintained accounts wished to do. A reckoning, as articulated by Professor Soil, was not always 'best'. There is a wealth of archival material in Florence and the surrounding area, where double entry is thought to have first emerged, that indicates that profit and financial position were the last things on the mind of the individuals, bankers, and merchants who used double entry in the 14th century. Datini, for example, never consolidated the financial reports of all his business activities in order to assess his overall financial position, even after he had adopted double entry across all his partnerships; nor did he ever do so in order to calculate his overall profit. So, what is the importance of double entry to the hypothesis presented in this book? Surely it is taking a reckoning, whatever the form of accounting, that is important, not the method of accounting that is used to produce it, yet double entry is given a prominence in this book that would suggest it is essential to that purpose. I would argue that it is not.

As someone with some knowledge of the subjects the coverage of which I have highlighted as being flawed both above and, in greater detail, in the Appendix, I found this to be a frustrating book, one that will perpetuate misunderstanding because people will read it and believe what it says.

It should be acknowledged that it is extremely difficult to be truly knowledgeable and insightful concerning all ages in the development of accounting practice. Professor Soil has made a valiant effort, but he has been let down by his not being aware of what he does not know concerning double entry and, apparently, the differences between it and other forms of bookkeeping. As a result, while the core message concerning the importance of taking a reckoning is undeniably valid, the material on double entry bookkeeping is, for the reasons outlined above, fundamentally flawed, misleading, and unconvincing and that for me, as I indicated above, casts doubt on how much I should trust the rest of this book.

Overall, there are too many errors and misunderstandings, too many incorrect throwaway statements of 'facts' that are not, and there is too much of a lack of clarity and transparency, particularly concerning forms of bookkeeping and accounting, for me to say that this book is any more than a 'relaxing read' which, like a historical novel of Sir Walter Scott, needs to be treated with caution.

APPENDIX

Errors and misunderstandings

There are many errors and misunderstandings in the book, both about people and events, and about accounting, particularly double entry. For example, in the few pages on Francesco di Marco Datini and Luca Pacioli we find:

1. Francesco di Marco whilst in Avignon (1350-1383) is described on page 16 as a trader and papal banker and, on page 17, as a banker and a minor local merchant who also engaged in international trade. Neither description is correct. Datini was operating as a merchant in Avignon from the early 1350s, was primarily a merchant throughout his career, and only opened his first bank, in Florence, in 1398, doing so with considerable caution (Goldthwaite, 2009, p. 413). It is true that he opened a moneychanger counter in Avignon in 1376 (Origo, 1992, p. 39), but that was not his principal activity in Avignon and is not the same at all as acting as a papal banker. Professor Soll makes extensive use of Iris Origo's book, The Merchant of Prato (1992) but, neither of the two pages he cited here support the statement that Datini was a banker to the Pope, or even primarily a banker while in Avignon.

2. On page 16, Datini did not return from Avignon to Florence, he returned to Prato.

3. We are told that he did so in 1383, which he did, built a house, which he did, and got married, which he did not--he had married in Avignon some years earlier. (On page 17, we are told that when his daughter was married the celebration was lavish and extremely costly, which it was. That was the marriage mentioned in the reference given for the text on page 16, not Datini's.)

4. A further, and in this case, fundamental misunderstanding is also to be found on page 17 where it is stated that Datini's "success came from acquiring investment capital through partners. He himself invested little money but was able to attract partners and investors." This is incorrect on two accounts, and is possibly the most incorrect and misleading statement in the entire book. Firstly, Datini's success was founded upon his management of all his businesses. By maintaining a constant stream of correspondence to, and an insistence upon receiving full and frequent reports from all his partners and managers, he micromanaged them all.

5. Secondly, he primarily used his own money to fund his businesses, not those of others. As recounted by Origo (1992), his 33 years as a merchant in Avignon (1350-1383) began with his selling some land in Prato for 150 florins and taking it to Avignon. When he needed more capital, he returned to Prato in 1358 and sold more land, this time for 138 florins. At the same time, he was entrusted with his brother Stefano's inheritance of 100 florins. He formed a partnership in Avignon with Niccolo di Bernardo in 1363 into which he invested 800 florins to di Bernardo's 400. In his partnership formed with Toro di Berto in 1367, they both invested 2,500 florins. In his partnership with Tuccio Lambertucci, they both invested 800 florins. When Datini left Avignon to return to Prato in 1383, he left 3,866 florins invested as his capital in a partnership with two ex-employees, neither of whom invested anything in the business. Datini's share of the profits was 50 per cent. In 1398, Datini provided 88 per cent of the total capital invested in his many partnerships (Goldthwaite, 2009, p. 78). This was a period when Tuscan merchants believed that funding business using other peoples money was too costly to make trade worthwhile (Origo, 1992, p. 119) and, as illustrated above, there is no evidence that Datini's view was any different.

6. Contrary to what is written or, at the very least implied on page 17, Datini did not always use double entry bookkeeping--he had returned to Prato before adopting double entry in two of his partnerships in 1386 (de Roover, 1937, pp. 274-5); and Datini's double entry method was not described in accounting manuals a century after his death in 1410, nor in Pacioli's bookkeeping treatise of 1494, nor in any of the 16th century Italian accounting manuals, for they described double entry bookkeeping as practiced in Venice, which had a different form than that of Tuscany.

Chapter 4 includes eight pages devoted to Luca Pacioli in which it is more difficult to identify correct statements than incorrect ones:

7. Starting on the first page in the chapter, page 48, we are told Pacioli was a Dominican friar. He was not. He was a Franciscan friar. In a remarkably bad example of poor proof reading we are told two paragraphs later that he was a Franciscan friar.

8. We are told that he was born in 1445. He was not. Having died aged 70 on 19th June 1517 (Nakanishi, 1979), he was born in either 1446 or 1447.

9. The invasions of the French and the Spanish are mentioned as being bad timing for the publication of Pacioli's Summa Arithmetica in 1494, but these were in the west, north-west, and south of Italy whereas Pacioli's book was published in the north-east and aimed at spreading the Venetian method of double entry bookkeeping to merchants in Urbino and, by virtue of where it was published--Venice--the Venetian Republic. Consequently the French invasions of the 1490s, and the French and Spanish invasions of the early 1500s, would hardly have impacted interest in the text by its intended readership.

10. Pacioli's bookkeeping manual did not "languish for almost a hundred years ignored by merchants and thinkers alike." Its publisher reprinted Pacioli's Summa Arithmetica in 1523, something it would not have done had virtually all the copies of the first printing not been sold; and it is inconceivable that the merchants who bought the 1494 printing would have ignored the 27 pages on bookkeeping.

On page 49:

11. Despite Professor Soil's claim to the contrary, Pacioli did not attend an abacus school in Sansepolcro. There was no such school in the town during the 15th century, nor even an abbaco master employed to teach there (Banker, 2003).

12. Contrary to another claim by Professor Soil, abacus schools did not train anyone to be a merchant. They principally taught applied mathematics for business. People learnt how to be a merchant 'on the job'.

13. There is no evidence that Pacioli ever had a place in the workshop of Piero della Francesca.

14. Pacioli certainly taught artists but, apart from Leonardo da Vinci, there is no indication of his being a great friend of any, though he clearly knew Piero della Francesca well and respected him highly.

15. No-one knows how Pacioli met Leon Battista Alberti, but would Pacioli have travelled to Milan to meet him as Professor Soil states, especially as it was to Rome that della Francesca went to study Euclid (Banker, 2009) and it is Rome that Alberti called home? Milan was over 300 kilometres from Pacioli's home in Sansepolcro and it is generally believed that his first trip away from there was to Venice, 200 kilometres distant; and Pacioli himself says nothing about meeting Alberti for the first time in Milan, nor of travelling there in the company of della Francesca in order to do so.

On page 50:

16. Pacioli stayed with Alberti in his residence in Rome after he left Venice in 1470 but he did not teach at the University at that time, and did not do so until 1488. To teach in a university, you needed to have a degree. Pacioli obtained his sometime between mid-1480 and mid-1484.

17. Pacioli was not at all famous in 1470.

18. Pacioli did teach Albrecht Durer, but Durer was only born in 1471 so could not have met Pacioli in Rome in 1470/71.

19. While some have certainly claimed that Guidobaldo, Duke of Urbino, is the second person in Pacioli's Naples portrait, the visual evidence supports the view that Albrecht Durer is the more likely candidate for the second person, not Guidobaldo (Mackinnon, 1993), as does the imagery in the painting.

20. The book on the bottom-right of Pacioli's portrait is a copy of Pacioli's own Summa Arithmetica, not a "Ledger" (Mackinnon, 1993, p. 131).

21. In 1474, Guidobaldo was 2 years old and incapable of being taught applied mathematics by anyone, even Pacioli.

22. There is no evidence that Pacioli was ever an accountant of any sort, or even a bookkeeper, though he probably did learn bookkeeping while employed by a merchant in Venice in the 1460s and may have acted in that capacity for that merchant.

23. Pacioli was a friar, not a monk.

24. There is no evidence that Guidobaldo ever encouraged Pacioli to teach accounting to anyone. He asked Pacioli to include a treatise on bookkeeping in Summa Arithmetica so that his loyal subjects (of Urbino) could learn how to do bookkeeping properly.

On page 51:

25. Pacioli's treatise on "accounting" was called 'Particuiaris de computis et scripturis', not simply "De computis", and can be translated from Latin as 'Concerning reckonings and recordings'. The title and its translation offered by Professor Soli of 'de computis'--"on computing"--reflects more the content of the rest of Pacioli's Summa Arithmetica than that of his bookkeeping treatise.

26. Nowhere in Pacioli's treatise does he either state that what he wrote was "essential in the maintenance of republics" or explain why that was so.

27. The statement, "Assets were the capital from which debits and credits were made" is confusing and, at the very least, incomplete from an accounting perspective, for assets are not capital and credit was widely used as a means of settlement at that time.

28. Paciolis "inventory" ('inventario') was not solely of assets. It also included liabilities. If you subtract the liabilities from the assets you arrive at net worth, the capital of the merchant. It was a statement of wealth and, effectively, the opening balance sheet of a business.

29. Pacioli wrote that three books were needed in business initially, not four--the inventario of assets and liabilities could be written on a piece of paper or in a separate book; and he stated that for small businesses only two are 'necessarythe journal and the ledger, the memorandum being the book that was no longer required. He also recommended keeping other books, such as a book of important letters; and a ricordanze, a book in which to record things that the merchant needed to remember.

30. Merchants did not "paste receipts" into their memorandum book, nor anywhere else. That would have been a waste of costly paper.

On page 52:

31. Pacioli did not tell merchants that they should systematically transfer notes into the journal as debits and credits at the end of each day. He told them, "the skillful bookkeeper, after four or five days, or eight days, may enter all these transactions from the said memorandum book into the Journal, day by day" (Geijsbeek, 1914, p. 43). Oddly, Professor Soil used a secondary source to support what he said, even though he had the primary source, Paciolis treatise, to hand within Geijsbeek's book.

32. The technical term for 'credit' in the Ledger is mistakenly attributed to the Journal. In the Journal, 'per' did represent 'debit' but 'A represented 'credit'. The credit part of the entry in Paciolis Journal, 'A x ...', translates as 'credit the account of x ...'. In Paciolis Ledger, 'debit' was represented by 'die dare', 'should give' and the credit by 'die avere', 'should receive'.

33. The statement, "each time a transaction was transferred to the ledger, a letter (A, B, or C) was written to mark where the transaction could be found in the corresponding book" is incorrect. Professor Sol has mixed-up Paciolis instruction for transferring balances to a new ledger (from Paciolis Chapter 36) with posting journal entries to the ledger.

34. Further aspects of the text at this point are incorrect: in Chapter 28 of his treatise, Pacioli says that a line should be drawn through ('diametraliter') both sides of the account in the old ledger and that the balance should then be transferred to the new ledger, but he does not say that the line should be "red", nor of any other colour.

35. There is no reason why the credit posting from the Journal would have been made before the debit. On the contrary, the debit posting would normally have been the first to be made as it came first in each journal entry.

36. The Ledger was not "systematically organised under headings for specific products ... or for specific businesses or ventures." There was nothing systematic about it other than that Pacioli recommended that an entire page should be allocated to the cash account and an index maintained listing the accounts and the folios on which they were to be found.

37. In addition, referring to the same statement, personal accounts were also maintained in the Ledger, as was a capital account and an account for cash.

38. Where in Pacioli's treatise does it say, "proprietors had to audit their managers"?

On page 53:

39. The sign of the cross (or an invocation to God or Christ) is also to be found in instructional bookkeeping texts that predate and post-date Pacioli's treatise. It was normal practice in account books across Italy and was not something that was done only by Datini and the Medici.

40. Pacioli's bookkeeping was not the method of Datini and Cosimo de' Medici, who both used a different form from Pacioli.

41. If Paciolis treatise languished unnoticed for over 100 years (page 48), how did his method "soon [become] internationalised" (page 53)?

On page 54:

42. Pacioli's Summa Arithemetica did not fail to "catch on".

43. It did not have a limited print run on the first edition of 1494, but one estimated at 2,000 copies, based on printing speeds and the time it took to complete printing (Sangster, 2007).

44. The second printing of the book was in 1523 not 1524.

45. The market for the book was not the "aristocracy and high nobility" but merchants and teachers of applied mathematics to the sons of craftsmen, artisans, and merchants (Sangster et ah, 2008).

46. They bought the book for all its more than 600 pages of applied mathematics and other things useful for a merchant to know, not solely the 27 pages on double entry bookkeeping.

47. The claim that "[t]here is ample evidence that Pacioli's chapter on accounting was a printed version of a commonly circulated Venetian manuscript accounting manual of the time" is speculation handed down by scholars since the 19th century, not fact; and there is no evidence at all to support this claim. Analysis of the only known extant example of such a manual, which dates from 1475 (van der Helm & Postma, 2000), indicates that Pacioli knew of these manuals and either had one in his possession, or had seen one before he wrote his treatise, but he certainly did not copy it--his pedagogy is very different. In fact, it is quite possible that the one he saw was the same one described in van der Helm & Postma.

48. It is true that "accounting", that is, bookkeeping, was generally learned by experience through a [lengthy] apprenticeship. However, it was also taught by bookkeeping tutors, possibly from the early 15th century; but, what was an "accounting academy" and where were and are all the "homemade accounting manuals [that] were readily accessible" but no-one has apparently ever seen?

49. There were not "[only a] few Italian translations of Pacioli's bookkeeping treatise", there were none. It was written in Italian and no-one who wrote bookkeeping textbooks in the following 200 years who might have rewritten Pacioli's treatise in a different Italian dialect did so.

50. Dominico Manzoni did not "reproduce large sections of [Pacioli's treatise]." He included much of Pacioli's syllabus in the didactic part of his book and he borrowed some of Pacioli's text, but he had much more of a single focus, omitting, for example, to give lessons in ethics and business management, both of which Pacioli had viewed as important.

51. The main title of Manzoni's book was 'Quaderno doppiocol suo giornal' which translates into English as, 'The double entry ledger with its journal' not "Double Entry Books and Their Journal", a surprising mis-translation given that a journal is a double entry book.

On page 55:

52. There was no "lack of success in spreading the theory of double entry" as presented in Pacioli's treatise. Pacioli's syllabus and the core of the method he describes for recording entries was adopted by Manzoni (1540), whose book went through at least six editions. Pacioli's treatise was well-known to the authors of bookkeeping texts for the following century at least. These were the people who spread Pacioli's views of what anyone needed to know to maintain accounts in double entry, but they presented it in a completely different way from Pacioli.

53. The invasions of Italy during the late 15th and 16th centuries did not dampen commerce to the point that they impacted the need for sound bookkeeping. Otherwise, there would not have been a series of bookkeeping texts printed in Venice in the 16th century, including the at least six editions of Manzoni s.

On page 64:

54. Professor Soil claims that Pacioli taught bookkeeping to accounting masters in Naples: we have no evidence that Pacioli ever taught accounting, to masters or to pupils in Naples, or anywhere else.

Professor Soil, also exhibits a surprising lack of understanding of the benefits of double entry over single entry:

55. On page xv, the seventh page in the book, he states that "double entry accounting ... is the essential tool in calculating profit and loss." It is not. Profit can be calculated from single entry or from no entry at all so long as adequate records are held of all expenditure and income. Double entry makes it easier to see the detail after the fact, facilitates control over items considered important to the business, and enables straightforward checks to be made that entries are complete, and correctly entered into both the correct accounts.

Nor does Professor Soil appear to understand the technique of double entry:

56. When, referring to how to make entries in a bilateral account with debits and credits on opposite sides, he writes (page xv): (1)
   Credits must equal debits. For example each time a
   goat is sold, the profit goes on the left, and the merchandise
   sold goes on the right. Then a tally of profit
   or loss is calculated, or balanced on the spot. Once the
   balance has been tallied, the transaction is over, and
   both sides have a line drawn through them. Profit and
   loss are known at all times.


This is not an example of how debits must equal credits, nor an explanation of how to calculate and then record a balance in a double entry-based account. This description relates solely to one side of each double entry for the entries in the account for the goat, and fails to do so correctly. The author omits to mention where in the account you place the initial entry relating to acquiring the goat, something that is necessary if you are to calculate the profit on its sale. No indication is given of what amount should be used for the credit entry relating to the sale: should it be the cost of the goat or the amount for which it has been sold--presumably the latter. Profit is not calculated and entered before making the credit entry for the amount received for the goat. First, the two sides of the account are summed and a balance identified. Yet, the profit has already been entered in the account in the instructions given above, so there is no need to calculate it, nor is there any need to balance the account, for that has already been done in this example when the goat was entered on the credit side of the account.

Also, into which accounts do the contra entries for each of these double entries in the example of the sale of a goat go, and why score out the two sides of the ledger account? That was a single entry bookkeeping device, and not one used in double entry except when a cash account was not maintained; or when transferring account balances between old and new ledgers; or when closing an account because of a lack of space within it for any more entries to be made, at which point a new account is opened at the first available space in the Ledger into which the balance of the closed account is the opening entry.

BIBLIOGRAPHY

Banker JR (2003) The culture of San Sepolcro during the youth of Piero della Francesca. Ann Arbor, MI: University of Michigan Press:

Banker JR (2009) Luca Pacioli e Piero della Francesca. In Giusti E and Martelli M (eds) Pacioli 500 Anni Dopo, Sansepolcro: Centro Studi "Mario Pancrazi", pp. 205-219.

De Roover R (1937) Aux origines dune technique intellectuelle: La formation et l'expansion de la comptabilite a partie double. In: Annales d'Histoire economique et sociale 44-45: 171-193; 270-298.

Fukuyama, F. (2014) Political Order and Political Decay: From the Industrial Revolution to the Globalization of Democracy. New York: Farrar, Straus and Giroux.

Geijsbeek JB (1914) Ancient double entry book-keeping. Denver: Geijsbeek (Accessed on 28 October 2014 at www.archive.org/details/ancientdoubleent00geijuoft)

Goldthwaite RA (2009) The Economy of Renaissance Florence. Baltimore: The Johns Hopkins University Press.

Mackinnon N (1993) The portrait of Fra Luca Pacioli. The Mathematical Gazette 77(479): 130-219.

Manzoni D (1540) Quademo doppio col suo giomale, nouamente Composto, & diligentissimamente ordinato, secondo il costume di Venetia ... Venetia: Comin de Tridino de Monferrato.

Nakanishi, A., (1979), On the life of Luca Pacioli, The Accounting Historians Journal, 6(2): 53-59.

Origo, I (1992) The merchant of Prato: Francesco di Marco Datini. London: Penguin Books Ltd.

Pacioli L (1494) Summa de Arithmetica Geometria Proportioni et Proportionalita. Venice: Paganino de Paganini.

Robertson, JS (2011) Capitalism and accounting in the Dutch East-India Company 1602-1623: an historical study of determining influences and practices. PhD thesis. School of Accounting and Finance: University of Woolongon. http://ro.uow.edu.au/theses/3329

Sangster A (2007) The printing of Paciolis Summa in 1494: How many copies were printed. The Accounting Historians Journal 34(1): 125-146.

Sangster A, Stoner G, and McCarthy P (2008) The market for Luca Paciolis Summa Arithmetica. The Accounting Historians Journal 35(1): 111-134.

Van der Helm, AJ and Postma J (2000) La Riegolo de Libro. Bookkeeping instructions from the mid-fifteenth century. In Previts GJ and Hernandez-Esteve E (eds) Accounting and History, Madrid: Asociacion Espanola de Contabilidad y Administration de Empresas, pp. 147-178.

(1) The two cited sources for the paragraph in which this text appears are actually one, the second cites the first, and neither includes this example that must, therefore, have been created by Professor Soli.
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