Number of words – 178

The concept of double entry bookkeeping was codified in the 15th century by Friar Luca Paacioli, a collaborator of Leonardo da Vinci. Although, there were earlier experiments with it, he introduced it by stating that a successful merchant needs three things: sufficient cash or credit, good bookkeepers and an accounting system that allows him to view his affairs at a glance, which the double entry system could do since you can quickly see how much is in each account at any time.

In some ways, this was more complicated then the single entry system that came before (where you would for example just count the amount of cash you had at the end of the day rather than have separate accounts for asset liabilities, etc) — indeed it was twice the work and thus there was resistance, but the double entry system enabled a much more solid understanding of profit, equity and the distinction between capital and income and established a built-in error catching system.

Excerpted from ‘Thinking in new boxes’ by Alan Iny and Luc de Brabandere