Linking Pacioli's double-entry bookkeeping, algebra, and art: accounting history or idle speculation?

ABSTRACT

This commentary responds to the speculations of Dean, Clarke, and Capalbo about the interconnections between double-entry bookkeeping (DEB) and Pacioli's emphasis on proportion, harmony, and balance. To make our speculations more than merely ‘idle’, we must do the hard work of constructing plausible hypotheses and testing them. I appreciate the hard work, scholarly skills, and dedication underlying the production of the authors’ speculation, nonetheless, we still need the hard work of theory and empirical research to explain DEB and verify the links between it and its intellectual, economic, social, and political context.

KEYWORDS:

• Double-entry bookkeeping
• entity perspective
• proprietary perspective
• speculation

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

1. ‘Homologous’ means a correspondence (from the Greek ‘Homos’, ‘the same’) in underlying structure, whereas ‘analogous’ means correspondence in external form (from the Greek ‘Ana’, ‘according to’).

2. ‘Materialist’ includes not just the physical world but also social relations, as opposed to ‘idealist’ where reality resides only in ideas.

3. Bryer (2013) shows that Fisher's system of ‘debits’ and ‘credits’ is not DEB even though Fisher claims that it is.

4. In my experience of teaching DEB, getting students to learn these rules is impossible without understanding the proprietary concept.

5. Unlike the authors (and the FASB) who think that the ‘proprietary’ perspective applies only to individuals, which they dismiss as legally inconsistent with the corporate form where shareholders do not own the assets, Sprague ([1907] 1972, 38) did not make the mistake of thinking of only the individual proprietor, but saw his theory as applying to all forms of ownership, including corporations that had a ‘collective unity’, a collective proprietor, the shareholders.

6. Barker explains this as an ‘error’, but it follows logically from the entity perspective for which ‘assets’ are expected future economic benefits, and ‘revenue’ therefore arises when these expectations increase. The consequence is counter-intuitive bookkeeping and increased subjectivity in recognising revenue (see e.g. Nobes 2012).

7. As Yamey (2010) shows, Pacioli's exposition of DEB was unlikely to have been helpful to merchants, but was probably intended for ‘beginners’, the sons and daughters of the rich, for whom ideological correctness was perhaps more important than technical clarity.