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The influence of Amatino Manucci and Luca Pacioli Fenny Smith Friday 25 April 2008 Gresham College Slide 2 Slide 3 Slide 4 Slide 5 Slide 6 Paciolis Summa Intended to teach commercial skills Part of a 300 year tradition Following Leonardo Fibonacci (1202) Treatises, schools, curricula No formal bookkeeping training Existing ledgers Slide 7 Mediaeval account books Ephemeral Often reused Scraped and written over Incorporated into later books If preserved, not under good conditions Slide 8 Early examples Genoa 1340, commune stewards Wealth of earlier manuscripts Particularly Florence and Tuscany Arrigo Castellani transcribed all extant pre- 1300 prose texts from Florence 2 volumes 1952 Including many account book fragments Slide 9 Studies Federico Melis Raymond de Roover Basil S. Yamey Geoffrey A. Lee Slide 10 Lees survey of 13 th C. ledgers and his 6 DE components 1.The business as an independent accounting entity 2.Algebraic opposition 3.Single monetary unit 4.Proprietors equity 5.Profit or loss as net equity change 6.Measure of profit and loss over an accounting period Slide 11 Early Florentine ledgers Unknown Florentine Banking firm, 1211 Gualtieri dal Borgo, guardian of the sons of Rinieri Ugelletti, 1259-67 Two ledgers of Bene Bencivenni, 1262-75 and 1277-96 Estate of Baldovino, son of Jacopo Riccomanni, 1272-8 Gentile de Sassetti and Sons, 1274-1310 Slide 12 1211 fragments Slide 13 Slide 14 The firm is clearly distinguished from outsiders There is algebraic offsetting of various kinds All entries are in Pisan currency with many intricate conversions in a variety of Italian and international coin Slide 15 The other early Florentine ledgers Gualtieri dal Borgo, guardian of the sons of Rinieri Ugelletti, 1259-67 Two ledgers of Bene Bencivenni, 1262-75 and 1277-96 Estate of Baldovino, son of Jacopo Riccomanni, 1272-8 Gentile de Sassetti and Sons, 1274-1310 Slide 16 Amatino Manucci Partner in Florentine firm of Giovanni Farolfi Based at Nmes Branches in a number of towns in the area Including Salon Manucci kept the accounts We have those from 1299-1300 Slide 17 Slide 18 Salon Slide 19 Farolfi company Partners Giovanni Farolfi Compagno Franchi (Pagno) Amatino (Matino) kept the books at Salon Bacchera Baldovino chief buyer Slide 20 Farolfi company Other partners Borrino (or Burrino) and Vitale Marsoppi Ughetto Buonaguida Francesco Cavalcante also possibly Tommasino Farolfi Giometto Verdiglione Slide 21 Farolfi company Major customers Rostang de Capre Archbishop of Arles Bertrand des Baux of Avellino to the north of Arles (not directly a customer of the company but often mentioned with the Archbishop in the accounts: good PR for the company) Slide 22 Farolfi company Other major customers Guillaume de Lambesc (a village a few miles to the east) Gilles Vacquier, a draper in Salon Ghilberto Doni Slide 23 Farolfi company Other major customers Gaetano (Tano) da Figliano Ischiatta della Fiorentina Giovanni Giuserani or Jean Jusserand Slide 24 Farolfi company Suppliers The Archbishop Tano da Figliano Giuserani/Jusserand Tommasino Farolfi of Mondragon Astruc Durand Loncontaire Slide 25 Farolfi company Commodities Wheat, barley, oats, wine, wool Cloth, yarn, dyeing materials also: Exchange Lending of money Official ban on usury? Slide 26 Slide 27 Diederne, d 27 di febbraio anno novantanove; posto ove doveano avere, al Quaderno de le spese, ne l'8 carte - 26 17s 2d Slide 28 Farolfi document Archivio di Stato in Florence 56 leaves, sequentially numbered Missing: 47 from beginning half a dozen in the run unknown number from the end Occasional pages stuck together Castellani had to use a mirror Slide 29 The first half of the ledger contained accounts for Debtors Expenditure Debit side of the head office account (the balance account) Farolfi document Slide 30 The second half of the ledger contained accounts for Creditors Profit Credit side of the balance account credit and debit would be compared for balancing Farolfi document Slide 31 The other ledgers White Ledger Similarly divided into two halves General Ledger acting as a continuation No closing balance account General Ledger has no opening one. Slide 32 The other ledgers Red Book Main merchandise accounts Similarly divided into two halves Purchases in the front, sales at the back Closing balances were transferred to the debit of the balance account in the General Ledger Slide 33 The other ledgers Cloth Ledger Cloth analogy to the Red Book Expenses Ledger Accounts relative to fixtures Current expenses Cash Book Slide 34 Subsidiary ledgers Plush Book partner Borrino Marsoppi business expenses total debited to Expenses and credited to Borrinos account Memorandum Ledger Similarly for the other partners Slide 35 Rent Four accounts for prepaid rent on various premises 16 was paid to Pierre Guillaume on 17 May 1299 Four years rent in advance for a warehouse Sum transferred from the White Ledger to the debit of the rent account Slide 36 Rent One year later on 17 May One years rent: 4 Credited to the rent account and debited to Current Expenses Slide 37 Other rent For advance rent of 12 for a shop, 3 written off after a year For 1/10/- for one year for another warehouse, all written off For 12 paid in advance for three years on 6 October 1297 for a second shop Remaining balance of 4 was transferred in the same way Slide 38 Sophistication Extensive cross referencing Accounts are Personal Real Goods and for Rent Nominal Fixtures Current Expenses Expenses of Eating and Drinking Slide 39 Balancing and equity Evidence that Manucci balanced accounts We cant check: Only debit side extant References to credit side show that it followed straight after extant pages Lee did a lot of detective work on existing entries Clear that Manuccis system had the means for checking Slide 40 Luca Pacioli Slide 41 Born around1445 In Borgo San Sepolcro Piero della Francesca Slide 42 Slide 43 Biography Slide 44 Urbino Piero della Francesca Slide 45 Biography Slide 46 Historical Perspective 300 year tradition since 1202 Leonardo Fibonaccis Liber abaci adopted by Italian merchants maestri dabaco, libri dabaco Late 13 th C 15 from the 14th C over 100 from the 15th Slide 47 Abacus books Slide 48 Northern Europe Still using counters in 18 th C Continuous use since ancient times First printed arithmetics teach both counters and figures: Robert Recorde 1544 Adam Riese from 1522 Slide 49 Slide 50 Margarita Philosophica Slide 51 De Scripturis Slide 52 Contents Inventory Memorandum Journal Ledger How to enter various transactions in the books Various other accounts Closing or balancing Slide 53 Inventory Given with an example Should be completed in one day As detailed as possible This helps the merchant to be vigilant about his business transactions There are more bridges to cross to make a good businessman than to make a Doctor of Laws The Law helps those that are awake, not those that sleep Slide 54 The three books Memorandum, Journal and Ledger Described with examples Warning: Have the books officially examined For many people keep duplicate sets of books, and show one set to the buyer and the other to the seller Slide 55 Entering transactions Different ways of purchasing goods cash, time, exchange of goods, and by draft various combinations of these Dealing with public offices Municipal Bank in Venice Office of Exchange Keep careful accounts with banks as the clerks can sometimes mix up the accounts Slide 56 Office of Exchange Brokerage fee Split between the buyer and the seller Worked example on recording in the books, using 4% as the fee Proverb: If you do nothing, you make no mistakes, and if you make no mistakes you do not learn Slide 57 More guidance business trips separate stores payment by draft or through the bank or both: safer to deliver the draft first, and then to settle through the bank exchange of goods bills of exchange Slide 58 Partnerships Record all details in the Memorandum: partnerships objective how long it is intended to last who is to be employed the partners respective investments and shares assets and liabilities assumed by the partnership careful segregation of the partnership in the Ledger Slide 59 Different expense accounts Ordinary and extraordinary household accounts Business expenses Employees wages Ordinary expenses: Food, wine, clothing, services, household goods Extraordinary expenses: What you might spend in gaming, or money that might be lost or stolen, or lost at sea or through fires Slide 60 Other essentials Income and Expense account Profit and Loss account carrying books forward correcting mistakes closing or balancing of accounts the trial balance interim transactions Slide 61 Last essentials Ledgers should be closed every year Frequent accounting makes for lasting friendship Keeping of correspondence Summary of the rules for keeping a ledger Important kinds of transactions to be entered in the Memorandum recorded in the Journal posted to the Ledger Slide 62 Assessment Many inconsistencies Not an ideal first text for a learner No sample set of accounts But: Second edition 1523 Copied (and acknowledged) by Cardano and Tartaglia Slide 63 Dependencies on De Scripturis Domenico Manzoni Quaderno doppio (Venice, 1540) based to a large extent on Paciolis tidied up how to correct badly kept account books set of illustrative accounts Slide 64 Dependencies on De Scripturis Jan Ympyn Nieuwe instructie (Antwerp1543) kept closely to the de Scripturis Improved treatment illustrative set of account books Editions in French (1543) English version by Grafton (1547) Slide 65 Dependencies on De Scripturis Hugh Oldcastles A profitable treatyce (1543) borrows very closely from de Scripturis does not contain a model set of accounts Schweickers Zwifach Buchhalten (1549) derivative of Manzonis work and he nce indirectly on the de Scripturis Slide 66 Later treatises on accounting Increased in number Showed increasing variety in subject matter and treatment Paciolis name continued to be remembered 19th century: the father of double entry bookkeeping Pacioli 2000 late 1990s software Slide 67 Conclusion Two important figures in the history of double entry bookkeeping Neither can be credited with its invention Both had their part to play Manucci was a steady practitioner Pacioli was a flamboyant teacher Slide 68 Questions?