Luca Pacioli

and cash went down, and that was really the only way to look at a performance of a business is looking at how much cash it has.

But then in the 15th century, and particularly in Italy, in Venice, with the increase in commerce and all of these Venetian merchants creating new types of businesses and trades, increase in commerce forced some of the folks at that time, and there was a priest by the name of luca pacioli or lucia pacioli who was a very cool priest at the time who invented the concept of debits and credits and also because we had the concept of investors so people began to invest in other people businesses and so when you have an investor you're now having someone who wants to know how is the business doing aside from cash so an investor wants to know what kind of expenses you have what types of income streams you have and so an investor is concerned with much more than cash going up or down and so that would that made Lucia Pacioli that priest we talked about invent the concept of debit and credit and so the idea of debit and credit was the economic benefit meaning the increase of economic benefit in one place in the business and the decrease in another place an example of that would be if you buy inventory your inventory economic benefit will go up so that would be debit and then credit will be to cash because you had to pay for it in cash and so it's kind of we have to record one side by debit one side by credit to represent the change in economic benefit in a business and that was as opposed to before it was only in cash cash going up and cash going down now with debit and credit we can record the inventory impact and the cash impact and that was the idea that Lucia Pazzioli came with in the 15th century and it stayed with us until today and we practice it in the current time.

My first step in recording any journal entry comes from the energy law that every action has an equal and opposite reaction.

And so for every business transaction, and the example that I have here is a computer purchase, whenever you have any action in the business, there's a reaction.

I mean, yeah, it is a bit of a made-up term, isn't it? And so if you think about the central heart of accounting, it's the double-entry general ledger.

Debits and credits, the foundational tool that Luca Pacioli invented however many thousand years ago.

And if you look at like where we're at today, we have the big general ledgers, Xero, Sage, QuickBooks, and others.

And I term those to be sort of traditional general ledgers.

It was a whole thing.

Clear up to the year of, uh, Luca Pacioli 2026.

Did I just use Luca Pacioli i- interchangeably with our Lord? Going to accounting health for that one.

Which means you're stepping into a heck of a job, but they're also just hecking profitable, man.

I mean, what I'm looking at here is an Apple-like iOS widget for my phone that is a readout of the temperature of my butt.

The Christian attack on the immorality of money is deeply influential and severely holds back the development of capitalism for centuries.

venice fourteen fifty a franciscan friar luca pacioli publishes the first ever book on accounting summa de aritmetica it is the single most important capitalist invention until the birth of the joint stock company and the modern factory In the book, Pacioli introduces the principle of double-entry bookkeeping, which gradually becomes standard practice in all companies.

Pacioli's textbook proposes that dealing well with money doesn't depend on fate anymore.

Money isn't a divine punishment or reward.

Yeah.

The ledger is basically the key innovation, by the way, in financial accounting as well, right? This goes back to Luca Pacioli and the invention of double-entry bookkeeping, which was kept on a ledger.

And in fact, Goethe, who was this sort of great German philosopher from about 500 years after the time of Luca Pacioli, goes on to say this is one of the quote-unquote finest inventions of mankind, right? Which is, you know, I say, well, when someone with an accounting background says that, people will say, well, that's self-serving.

But this is Gata saying it.

And that's because double-entry bookkeeping and the creation of the ledger, the financial ledger in that case, was credited with the invention of modern capitalism.