We’re always on the lookout for interesting accounting content (I swear that’s not an oxymoron), and NPR’s Planet Money often gives us just that. In episode 407 of Planet Money, David Kestenbaum and Jacob Goldstein retold a story they discovered earlier in 2012. In speaking with the author of Double Entry: How the Merchants of Venice Created Modern Finance, Jane Gleeson-White, they go through the story of where Double Entry was created, and how one man, Luca Pacioli, a monk, mathematician, and possibly the boyfriend of Leonardo da Vinci, made this innovation possible.
What is Double Entry Accounting
For the accounting equation (Assets = (Liabilities + Owner’s Equity)) to work, it depends on the two sides of the equation staying in balance. This involves recording each transaction in at least two accounts, to ensure you have a debit in one or more accounts and a credit to one or more accounts.
In double entry bookkeeping, debits and credits are entries made in account ledgers to record changes in value resulting from business transactions. An account ledger looks a T (which is why it can be called a T-account) with debits on the left and credits on the right. This method has become the standard method in our world today, and it’s all thanks to the merchants of Venice and Luca Pacioli and his giant book of mathematics.
To learn more about how double entry accounting came to be, check out Planet Money’s episode below.
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