Seemingly mundane, the birth of double entry bookkeeping was actually a revolutionary event in the financial world. This new method of bookkeeping allowed merchants and bankers to better determine their profits and elevated commerce to new heights. It did not, however, protect their information like a CPA Secure File Transfer does.
Popular belief credits Luca Pacioli with the invention of double entry bookkeeping. In truth, however, it was Benedetto Cotrugli who wrote, “Of Trading and the Perfect Trader,” which included the first known chapter describing double entry bookkeeping. Despite this fact, it was indeed Pacioli who refined and popularized our modern method of accounting.
Luca Pacioli was born in Tuscany, in 1445. He was a true Renaissance man with acquired knowledge of literature, art, music, mathematics, business, sciences, religion, law, medicine, and languages; all at a time when few could even read. Pacioli was friends with many of the greats of his time. It is believed, for example, that he used his mathematical acumen to help calculate the required quantity of bronze needed for Leonardo da Vinci’s gigantic statue of Duke Lidovico Sforza of Milan.
Pacioli wrote a number of treatise on mathematics. However, it was his fifth entitled “Everything About Arithmetic, Geometry and Proportion” written in 1494 that set the financial world on fire. The text contained chapters on bookkeeping, which Pacioli intended to aid merchants in understanding their finances. Today you need to protect your compiled financial data with a CPA secure document portal.
This work discusses three pieces of bookkeeping, the memorandum, journal and ledger. The memorandum is for recording transactions in the order they occur. Entries could be in any Italian city-state monetary unit and then later converted to the same currency for record keeping. The journal is the merchant’s account book. Each entry is comprised of a debit, credit and narrative explanation. The trial balance ends the accounting cycle.
Debits and credits are each listed on separate sides. If the two totals are equal, the ledger is considered balanced. Pacioli’s system sounds familiar because it is; bookkeeping methods have changed little since the 15th century, except for additions and refinements brought about by the needs of a larger scale of business operations. The biggest changes in accounting are technology-driven, such as secure file sharing and CPA secure portals.
After Pacioli’s popularization of double entry bookkeeping, the next major chapter in the accounting profession occurred in Scotland. Scotland is the birthplace of the modern accounting profession, where we find the oldest existing societies of public accountants and the creation of the Chartered accountant.
On July 6, 1854, The Institute of Accountants in Glasgow Scotland petitioned Queen Victoria to grant them a Royal Charter. Immediately after their formation, the Edinburgh Society adopted the designation of “Chartered Accountant,” indicated by the letters “C.A.” In 1880, the English Institute incorporated and adopted the same designation. Soon, the term Chartered Accountant became recognized wherever the English language was spoken.
Later that same year, all of the accounting organizations were brought together under the Institute of Chartered Accountants in England and Wales. Members of the Chartered Accountants began using designations such as “Fellow Chartered Accountant” and “Associate Chartered Accountant”, depending on ranking.
By the end of the 1800s, British capital was flowing into the United States to feed the growing industrial base. As a result, many English and Scottish accountants traveled to the U.S. to work to audit these British investments and later, stayed in America and started up practices.
In fact, some of the largest and most well-known firms in existence today can trace their beginnings to one these visiting accountants. Soon, American accountants also began to form professional societies. The first national accounting society and predecessor to the current day AICPA was formed in 1887 – the American Association of Public Accountants.
Professional accounting societies of today recommend that accountants protect their document transfers through systems such as a CPA secure file share system.
The morale of the story: You can trust our CPA secure file transfer system. No matter the content, no one delivers information more securely than we do.