"A person should not go to sleep at night until the debits equal the credits"

Luca Pacioli: The Father of Accounting

In 1494, the first book on double-entry accounting was published. The author was an Italian friar, Luca Pacioli. His impact on accounting was so great that five centuries later, accountants from around the world gathered in the Italian village of San Sepulcro to celebrate the anniversary of the book's publication.The first accounting book actually was one of five sections in Pacioli's mathematics book titled "Everything about Arithmetic, Geometry, and Proportions." This section on accounting served as the world's only accounting textbook until well into the 16th century.

Since Pacioli was a Franciscan friar, he might be referred to simply as Friar Luca. While Friar Luca is often called the "Father of Accounting," he did not invent the system. Instead, he simply described a method used by merchants in Venice during the Italian Renaissance period. His system included most of the accounting cycle as we know it today. For example, he described the use journals and ledgers, and he warned that a person should not go to sleep at night until the debits equalled the credits! His ledger included assets (including receivables and inventories), liabilities, capital, income, and expense accounts. Friar Luca demonstrated year-end closing entries and proposed that a trial balance be used to prove a balanced ledger. Also, his treatise alludes to a wide range of topics from accounting ethics to cost accounting.

Pacioli was about 49 years old in 1494 - just two years after Columbus discovered America - when he returned to Venice for the publication of his fifth book, Summa de Arithmetica, Geometria, Proportioni et Proportionalita (Everything About Arithmetic, Geometry and Proportion). It was written as a digest and guide to existing mathematical knowledge, and bookkeeping was only one of five topics covered. The Summa's 36 short chapters on bookkeeping, entitled De Computis et Scripturis (Of Reckonings and Writings) were added "in order that the subjects of the most gracious Duke of Urbino may have complete instructions in the conduct of business," and to "give the trader without delay information as to his assets and liabilities" (All quotes from the translation by J.B. Geijsbeek, Ancient Double Entry Bookkeeping: Lucas Pacioli's Treatise, 1914).

Numerous tiny details of bookkeeping technique set forth by Pacioli were followed in texts and the profession for at least the next four centuries, as accounting historian Henry Rand Hatfield put it, "persisting like buttons on our coat sleeves, long after their significance had disappeared." Perhaps the best proof that Pacioli's work was considered potentially significant even at the time of publication was the very fact that it was printed on November 10, 1494. Guttenberg had just a quarter-century earlier invented metal type, and it was still an extremely expensive proposition to print a book.[...]

Follow the link above for references. I'm just about to complete an online course about using the Double-entry bookkeeping system, and I think the system is brilliant. So I found this history interesting. More historical facts from Wikipedia:

[...] The earliest extant accounting records that follow the modern double-entry form are those of Amatino Manucci, a Florentine merchant at the end of the 13th century.[1] Another old extant evidence of full double-entry bookkeeping is the Farolfi ledger of 1299-1300. Giovanino Farolfi & Company were a firm of Florentine merchants whose head office was in Nîmes who also acted as moneylenders to the Archbishop of Arles, their most important customer.[2] Some sources suggest that Giovanni di Bicci de' Medici introduced this method for the Medici bank in the 14th century.

However, the oldest discovered record of a complete double-entry system is the Messari (Italian: Treasurer's) accounts of the Republic of Genoa in 1340. The Messari accounts contain debits and credits journalised in a bilateral form, and contains balances carried forward from the preceding year, and therefore enjoy general recognition as a double-entry system.[3] By the end of the 15th century, the bankers and merchants of Florence, Genoa, Venice and Lübeck used this system widely.

Luca Pacioli, a Franciscan friar and collaborator of Leonardo da Vinci, first codified the system in his mathematics textbook Summa de arithmetica, geometria, proportioni et proportionalità published in Venice in 1494.[4] Pacioli is often called the "father of accounting" because he was the first to publish a detailed description of the double-entry system, thus enabling others to study and use it.[5][6] There is however controversy among scholars lately that Benedetto Cotrugli wrote the first manual on a double-entry bookkeeping system in his 1458 treatise Della mercatura e del mercante perfetto.[7][8][9][9][1 [...]

So perhaps it was the Florentine Merchants who invented the system? Well whoever it was, I'm a fan!

Follow the link for embedded links and more information.

     

Will Greece, Italy and other PIIGS sink the Euro?

For my fishtank, I got one of those Greco-Roman Ruins backgrounds. I thought perhaps, to make it contemporary, all I needed to do was add a Euro ATM machine:


It would be ironic if Greece and Italy, from which the principles of Western Civilization sprang, turn out to be also the springboard for it's collapse and ruin.

Is it really that bad? I can't say for sure. But it does look alarming, as the Europeans seem unable to contain the problem:

Spain and France: Market says you're next!

NEW YORK (CNNMoney) -- Next up on the 2011 Europe Financial Calamity tour? Spain and France.

Yes, government bond yields in Italy are still climbing -- even after the resignation of Silvio Berlusconi. With the Italian 10-year back above 7%, it's clear that investors are still very nervous about the debt problems in Europe's boot.

But perhaps more alarming is the fact that the market is now increasingly wary of Italy's Mediterranean neighbors as well.

Yields on Spain's 10-year bond have climbed to about 6.3%. That's dangerously close to the 7% level that many investors feel could signal the need for a Spanish bailout.

And France's bonds are starting to look like French toast. With yields now around 3.67%, that puts the "pain" in pain perdu. (Yes, I watch Top Chef.)

[...]

The verdict from the experts I spoke to: Unless the European Central Bank steps up to the plate with a real plan to stop the bleeding, Europe will keep bleeding.

"The market keeps looking ahead to the next potential victim in Europe," said Jurgen Odenius, chief economist for Prudential Fixed Income in Newark, N.J. "Volatility is rising because there is no comprehensive, credible solution. It's becoming readily apparent that there's only one game in town, an ECB rescue."

Europe: New leaders, same debt crisis

Odenius said he doubts that Europe will be able to convince China and other global sovereign wealth funds to put up enough capital to increase the leverage of the European Financial Stability Facility bailout fund. That means the ECB may have to be the proverbial lender of last resort.

If the ECB does not take more bold action -- namely a strong commitment to keep buying more sovereign debt -- Odenius thinks Spanish yields may soon hit 7% like in Italy. And if that happens, France could also be in serious trouble.

"The French have problems in their banking system related to Italy, Spain and other countries. Investors are not suggesting that France is a crisis just yet, but it is murky," he said.

Michelle Gibley, senior market analyst with the Schwab Center for Financial Research in Denver, agreed. European leaders need to bust out a "bazooka" to deal with the debt crisis, she said.

[...]

But the problem facing Europe right now is that leaders haven't even acknowledged they have a big financial weapon, let alone talk about a willingness to use it.

"I am concerned that European policy makers have yet to find the bazooka," Gibley said. "The crisis is rolling from one nation to the next. The contagion has not been contained."

Eurozone teeters on edge of recession

Her biggest worry is that European governments are simply choosing to focus on austerity to deal with their fiscal problems. But while budget cuts, higher taxes and more responsible spending can help cut onerous debt loads, such actions do nothing to help stimulate their economies.

"The debt crisis is now potentially entering a dangerous cycle where austerity just reduces growth, borrowing costs continue to rise and credit ratings get downgraded. That's because nobody is addressing growth," Gibley said. "How much more turmoil does there need to be before the ECB does more?" [...]

But how much more CAN they do? Can they stimulate economic growth, sufficient enough to stay on top of their debt payments? If they don't have a bazooka, will they get one in time?

It all remains to be seen. Hopefully not on a fish tank backdrop.


Also see:

Why Greece is in trouble. And a warning for us.
     

Illegal Immigration is a Pain to Spain. But is it also making Spain the Gateway to Europe?

Spain granted an amnesty to almost a million illegals three years ago, the largest amnesty in Spain's history. Today, they now have another million illegals, along with a soring crime rate and growing unemployment.

Recently Spain has been attacking Italy's new government, which has been cracking down on illegal immigrants in Italy. More from Soeren Kern at the Brussels Journal:

Why Spain Lectures Other Countries on Immigration

Italian voters in April returned Prime Minister Silvio Berlusconi to a third term in office. The center-right leader was given a strong mandate to crack down on runaway immigration and spiraling street crime, two hot-button issues that are intrinsically linked, not just in the minds of Italians, but in those of many other Europeans too, especially in Spain.

As a result, Spanish Socialists are (rightly) worried that Berlusconi’s get-tough approach will jeopardize their own fantastical vision of turning Europe into a post-modern multicultural utopia.

[...]

Since Spanish Socialists (more often than not) have trouble winning arguments on their own merit, the preferred tactic is to demonize their opponents instead. And so De la Vega’s comments were echoed by the new Spanish Minister for Labor and Immigration, Celestino Corbacho, who felt obliged to accuse Berlusconi of wanting “to criminalize those who are different.”

[...]

Apart from the strategic threat that Italy’s immigration crackdown poses to the post-nationalist multicultural vision that Spanish Socialists have for Europe, there are two more practical (and inter-related) reasons why the Socialist Party has latched onto the immigration issue: Domestic politics and fear that the immigrants expelled from Italy will come to Spain instead.

During the recent general election campaign in Spain, survey after survey showed that Spanish voters perceived the center-right Popular Party to be far better equipped than the Socialist Party to tackle the issues of immigration and crime.

[...]

As a result, the Socialists are now trying to make these issues their own. But they are doing so by reframing the question of immigration through the use of post-modern word games that give the appearance that they have a more benevolent approach.

[...]

By rewarding illegal immigrants with Spanish (and thus European) documentation, Zapatero has unleashed what is known as the “call effect” to people as far away as Kashmir who now believe that Spain is an easy gateway into Europe. [...]

It's quite a dance Spain is doing. The article goes on to give more details of Spain's predicament, and how it fits into immigration in Europe as a whole. The socialists in Spain have been using every trick in the book to vilify their opponents, but it's wearing thin as reality sets in and grates away at the Spanish Public. Their current government sounds like the city council of Berkeley, CA. Strident and hysterical, posturing while lacking real content or ability to accomplish or solve anything.

Lots of high drama in this story, with accusations being hurled. But as the pressure builds, it looks to me like... somethings gotta give. I'll be watching.