Profit Calculation in a late 14th century sole proprietorship, the case of Francesco DATINI

This paper examines the Profit on merchandise accounts (a forerunner of the income statement) in a sole proprietorship in Pisa that officially operated between 1386 and 1392, but took several months to finally end its activities, which it did in 1393. The Profit on merchandise account was where the balance on each goods account was transferred when all the items recorded in it were sold. The principal contribution of this paper is the identification of a unique approach to medieval product costing that ensured indirect expenses on merchandise were recovered from customers when sales took place, while earning an average return of over 10 percent on those costs. It also highlights the problems encountered when working with archival material that has deteriorated over time; and presents a research method that reconstructs missing data using the trail to original entries and contra entries recorded in double entry.

Pacioli’s Lens: Through a Glass, Darkly

It has long been argued that double-entry bookkeeping (‘DEB’) was important for enabling capitalism’s development in the West and heralded the beginning of ‘modern accounting’. However, these claims remain contested so it is important to understand the history of DEB’s emergence about 700 years ago and its underlying rationale. Sangster (2018a) [Pacioli's Lens: God, Humanism, Euclid, and the Rhetoric of Double Entry. The Accounting Review, 93(2): 299-314] argues that, in the first printed manual on DEB in 1494, Pacioli presented a novel ‘axiomatic’ approach to explaining DEB that requires a corresponding ‘paradigmatic shift’ in our appreciation of his contribution. This paper challenges Sangster’s interpretation of Pacioli’s mathematical contribution and calls for deeper understanding of the historical development of DEB in the West by comparison with accounting developments in the East.

The business needs that drove the emergence of double entry In defense of Pacioli, again… it is time to remove those dark glasses

Being able to understand how double entry works is a critically important skill of an accountant but, few accounting graduates either understand or perform double entry at the level desired. It has always been taught using rules, never by principles. This paper responds to and rejects criticisms published in this journal by Richard Macve. They concern a paper I published in 2018 presenting Luca Pacioli’s approach to teaching double entry using a principles-based approach. My response also uses grounded theory to reject Professor Macve’s theory concerning the development of double entry by generating an opposing new theory to explain what motivated its emergence. Furthermore, it highlights problems in the use of literature in accounting history; and uses theories of pedagogy and studies on teaching DEB to reject his insistence that it should be taught using a balance sheet equation approach. Several other comments/suggestions in his wide-ranging article are addressed.

Three Big 8 Audit Firms Notify the AICPA in 1970 of Their Lack of Confidence in the Accounting Principles Board

The aim of this article is to display, for the first time in the literature, the letters written in November 1970 by the senior partners of three of the Big 8 audit firms, notifying the AICPA of their lack of confidence in the Accounting Principles Board (APB). The letters were provoked by the “embarrassing” and much criticized Opinions 16 and 17 on accounting for pooling of interests and intangible assets.

George Sorter’s Influence on Accounting Thought

An innovative accounting theorist and educator, Sorter was concerned about how accounting information could be used in financial and management decision making. He formulated an events approach to accounting that called for providing a vast array of presumably relevant information to users of financial reports to allow them as individuals to select whichever data they deemed suitable to make their own long run forecasts and their own financial and management decisions. He emphasized that valuation of the firm is a subjective endeavor, a matter of individual user perception. He served as the research director of the AICPA’s Trueblood Report (1973), which laid the foundation for the FASB’s Conceptual Framework.