The Father of Accounting: Luca Pacioli


Bench Accounting


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March 24, 2023

This article is Tax Professional approved


April is Financial Literacy Month—and if you’re looking to improve your understanding of accounting and how it came to be, then you’ve come to the right place.

If you’re a small business owner, you’re likely familiar with common accounting terms like balance sheets, and income statements. However, you may not know how these financial statements came to be, and who we have to thank for the most commonly used accounting system in the world.

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Luca Pacioli. Friar Luca. The Father of Accounting. These are some of the (many) names and titles used to refer to the founder of what many bookkeepers and accountants know today as modern accounting.

The story of Luca Pacioli begins in Northern Italy in the mid-1400s. The Italian Renaissance was in full swing—the arts were on the rise and defining figures like Leonardo Da Vinci and Michelangelo lead the revival of the arts, literature, and sciences.

Accounting at this time was widely done by merchants of trade as a way to keep track of transactions and the standing of their wealth. The development of Pacioli’s accounting method is filled with learnings from Venetian merchants, the influences of fellow historical figures, and details of how Pacioli came to be one of the most important figures in the history of accounting.

If you’re a small business owner, you likely understand the important role that accurate accounting plays in running a business, or depending on your background—you may even be familiar with how it’s done. Modern bookkeeping services like Bench (that’s us), still use Luca Pacioli’s accounting systems.

Keep reading as we dive into the origin story of Pacioli’s system, and how his practices are still used by bookkeepers and accountants here in the twenty-first century.

The life of Luca Pacioli

Luca Pacioli was born in 1445, in a town called Sansepolcro—which was located in what we now know as Tuscany, Italy. Eager to pursue his education in arithmetic and mathematics, Pacioli moved to Venice at a young age to work in the service of a wealthy, Venetian merchant.

Venetian merchants were the business people of the Italian Renaissance who would organize trade between other countries throughout the Eastern Mediterranean and Europe. The complexity of international trade at this time prompted better practices of recording transactions, which would be influenced by the teachers and mathematicians of the time.

During his time in Venice, Pacioli would learn from the ways of the merchants, adopting practices for which he would eventually be known—the system of double-entry accounting.

Pacioli and the influence of Leonardo Da Vinci

Though you may not have heard of Luca Pacioli before reading this article—it’s safe to say you’re likely familiar with the work of Leonardo Da Vinci.

Leonardo Da Vinci was arguably one of the greatest influences to come out of the Italian Renaissance. He was a master of the arts, an engineer and responsible for the notable works of the Mona Lisa and the Vetruvian Man.

Pacioli met Da Vinci in Milan in 1496, where he was brought to teach a court—which included Da Vinci himself. The two men quickly became close friends and bonded over their shared passions for mathematics and the arts.

They continued to learn from each other during their stay in Milan and it was at this time that Pacioli would write his second most well-known text, De Divina Proportione. This text ended up being the first of three parts to a series of books in which Da Vinci would contribute his realistic sketches.

The legacy of Luca Pacioli: The Summa de Arithmetica

After his learnings in Milan, Pacioli began traveling, teaching at different universities, and publishing more books on mathematics—including the first text written on double-entry accounting: the Summa de Arithmetica.

The Summa would include a summarization of all the known mathematical theories of the time—including, arithmetic, algebra, geometry, trigonometry, and of course, accounting.

Though the book wasn’t made solely of Pacioli’s original theories, his summarization of the double-entry accounting system is to thank for 500+ years of bookkeeping that would follow his time.

The first record of double-entry accounting

Pacioli’s description of double-entry accounting in the Summa included most of what we know of the accounting cycle today. The text would be the first full description of the double-entry accounting system, based on Venetian merchants’ use of balance sheets, income statements, trial balances, and debits and credits.

Today, double-entry accounting is widely used as a method of bookkeeping that tracks where your money comes from and where it’s going on a general ledger. We have Pacioli to thank for the task of entering each “debit” and “credit” on a ledger, and ensuring their total balance.

Pacioli believed the most difficult part of double-entry accounting was determining the correct amounts of both debits and credits—and that one should not rest until their debits are balanced with their credits.

His findings would also mention many common terms used by modern accounts, and small business owners including:

  • Assets
  • Liabilities
  • Capital income
  • Expense accounts
  • Trial balances

Pacioli’s impact on modern accounting

So what impact did Pacioli’s work have on modern accounting?

Many argue that without Pacioli’s work, the expansion of free market capitalism throughout Europe and North America wouldn’t have been possible.

Pacioli’s collection and publication of the mathematical advancements of his time allowed for the widespread adoption of the double-entry accounting system, which is still used by professional accountants today.

His system provided a way to keep track of the impact of payment on a business’s bottom line—a key insight that would define our current economy here in the 21st century.

Why was the expansion of free-market trade important?

This wide-spread adoption of this system led to the rise of modern accounting, accurate record-keeping, and the overall growth of industry and trade. Without the widespread of Pacioli’s accounting theories, the development of businesses would be drastically impaired, worldwide.

Luca Palioli’s practices weren’t the first of their kind, but they were some of the most advanced—and their discovery would end up being one of the major events in accounting history.

Read up on the basics of modern accounting:

This post is to be used for informational purposes only and does not constitute legal, business, or tax advice. Each person should consult his or her own attorney, business advisor, or tax advisor with respect to matters referenced in this post. Bench assumes no liability for actions taken in reliance upon the information contained herein.
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