![]() Having spent time studying both al-Khwārizmī and Leonardo of Pisa (a.k.a. Excel is a digital implementation of ninth century commercial arithmetic and algebra, as laid out by al-Khwārizmī in his two famous books on the subjects QuickBooks an implementation of the book-keeping methods described by Pacioli in Chapter 9 of Summa. As a result, I long ago started keeping meticulous records, using Excel spreadsheets to keep track of individual activities and QuickBooks to bring it all together. I have several sources of income from around the world-from my university position and my ed tech startup company BrainQuake fees from writing, speaking, and consulting royalties from books and more recently income from a number of pensions and annuities. Though by no stretch of the imagination am I in the big-income category, my tax-filing situation is not simple. Indeed, I spent several days in March going through my QuickBook records as I prepared my annual tax filing. Sure, I knew what double-entry book-keeping was. (I also gave a talk at a public showing Christie’s organized in San Francisco on April 24, which gave me an opportunity to examine the book myself.) Neither did I-until I was asked to write a brief article about the fifteenth century Italian mathematician Luca Pacioli, to go into the sale catalog for the upcoming (June) Christie’s auction of an original first edition of his famous book Summa de arithmetica, geometria, proportioni et proportionalita (“Summary of arithmetic, geometry, proportions and proportionality”), published in 1494, which I referred to in last month’s column. Hence, the accounting equation will still be in equilibrium.What’s your reaction when you see the term “double-entry book-keeping”? Do you associate it with cool, societal-changing innovations like the Internet, Google, social media, laptops, and smartphones? Probably not. This is known as the Duality Principal.ĭebit entries are ones that account for the following effects:Ĭredit entries are ones that account for the following effects:ĭouble Entry is recorded in a manner that the Accounting Equation is always in balance.Īny increase in expense (Dr) will be offset by a decrease in assets (Cr) or increase in liability or equity (Cr) and vice-versa. Accounting system is based on the principal that for every Debit entry, there will always be an equal Credit entry. Traditionally, the two effects of an accounting entry are known as Debit (Dr) and Credit (Cr). Such information can only be gained from accounting records if both effects of a transaction are accounted for. Perhaps the machine was bought in exchange of another machine. Imagine if an entity purchased a machine during a year, but the accounting records do not show whether the machine was purchased for cash or on credit. ![]() Without applying double entry concept, accounting records would only reflect a partial view of the company’s affairs. ![]() ![]() This is the application of double entry concept. Conversely, the seller will be one drink short though his cash balance would increase by the price of the drink.Īccounting attempts to record both effects of a transaction or event on the entity’s financial statements. The buyer’s cash balance would decrease by the amount of the cost of purchase while on the other hand he will acquire a bottle of drink. This simple transaction has two effects from the perspective of both, the buyer as well as the seller. For example, if someone transacts a purchase of a drink from a local store, he pays cash to the shopkeeper and in return, he gets a bottle of dink.
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