Luca Pacioli on Business Profits

Abstract

Double-entry accounting, with its method for the objective calculation of profits and system of capital accounting, is often seen as closely linked with our modern-day system of capitalism. Questions regarding the role of profits are at the center of many debates on "business ethics." Luca Pacioli, a 15th century Franciscan friar, is recognized as the "father of accounting" because he published the first description of the double-entry system. However, Pacioli's "ethical" views have not been as broadly recognized. The main purpose of this paper is to present and discuss Pacioli's views on the conduct of business enterprise and the pursuit of business profits. Two years after Columbus first arrived in the Americas, and almost 50 years before Copernicus' theory that the earth revolves around the sun was first published, a Franciscan friar by the name of Luca Pacioli published his Summa de Arithmetica, Geometrica, Proportioni et Proportionalita. While Pacioli's Summa was pri- marily a treatise on mathematics, it also included a section describing the "Venetian" - or, what is now commonly known as the "double-entry" - method of bookkeeping. The double-entry system, the description of which was first pub- lished by Pacioli, continues to this day to serve as the foundation of modern accounting systems. Based on his articulation of the double-entry method of bookkeeping in his Summa, Pacioli is