Question

Luca pacioli when he gives theory of modern accounting

Answer 1

The contribution of Luca pacioli in accounting was honored by accountants around the world who gathered in San Sepulcro an Italian village to pay their huge tribute to his book published on double-entry accounting. The first accounting book which was published in 1494 was based on five sections in his mathematical book title in which he showed ‘Everything about Arithmetic, Geometry and Proportions’. Until the 16th century, this book written on accounting served as the only textbook on accounting around the world and due to this significant contribution, Luca Pacioli, was no doubt the father of accounting. He did not invent the system but he described the method which was used by merchants in Venice during the period of Italian Renaissance. The system he introduced in his book of accounting was mostly the accounting cycle which is well-known in the modern world of accounting. Luca Pacioli introduced the use of journals and ledgers in accounting systems and warned that the accountant must not sleep until the debits are equaled to credits. The ledgers he introduced were based on assets receivables and inventories, liabilities, capital, expenditure and income accounts. Friar Luca also demonstrated the entries which the companies can use for their yearend and he proposed the entry of trial balance for a balanced ledger. He also introduced wide range of topics ranging from accounting ethics to cost accounting. His proposed accounting entries and year end closing entries became so famous that they were widely used in industrial and financial organizations in the modern world. Today, no organization can ignore his proposed journal and ledger accounting system and then showing the balance of debits and credits to get the desired results for the organizations. When he published his book on accounting, he was 49 years old in the year 1494, returned to Venice for the famous publication of his fifth book on Geometria, Summa de Arthmetica, Proportioni et Proportionalita. This book was written on Geometry, Everything about Arithmetic and Proportions. In this book, he presented the guide to the already written mathematical knowledge and bookkeeping was one of the most important accounting topics covered in this book. He presented 36 short written chapters on bookkeeping in which he gave the necessary instructions in the conduct of business and given the traders precious information on accounting without any delay as to his assets and liabilities. Luca Pacioli also introduced numerous details about bookkeeping techniques which were followed in texts and in professions for the next four centuries. Then the accounting historian Henry Rand Hatfield argued that Pacioli’s work was potentially significant even at the time of publication when it was first printed in November 10, 1494. Now his underlined accounting principles are used by various accounting practitioners in industrial accounting, public accounting, and accounting services for non-profit organizations. Accounting techniques were proved to be very effective for investors, business firms, lending institutions, and all the entire users of financial information are indebted to Luca Pacioli for his unbelievable and monumental role in the development of accounting.


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