Accounting
Accounting and bookkeeping practices introduced during the Renaissance made it easier for merchants to keep track of their profits and losses. The most significant of these new techniques was double-entry bookkeeping.
The Double-Entry System. During the Middle Ages, merchants and landowners used single-entry bookkeeping to track the money they spent and received. With this system, also called "charge and discharge," the merchant recorded each day's receipts and expenses in an account book. The book showed how much money the merchant took in or paid out on each individual transaction. However, it did not enable trades-people to see at a glance which customers owed them money or which accounts were most profitable over time.
Double-entry bookkeeping involved recording each transaction twice, often in two separate columns in the account book. In the left-hand column, the merchant listed the amount of money spent for goods, along with other information such as the date of the sale. When the merchant received payment for a sale, this information went in the right-hand column. This double-entry system allowed merchants to keep a running total of profits and losses. When the total in the right column was greater than that in the left column, it showed that the merchant had made money on a transaction.
Merchants often kept separate books for each account. Someone who dealt in grain, cloth, and sugar might have an account book for each product. Each transaction noted in the account books was later transferred to the ledger, a book that included transactions for all accounts. The totals for both columns in the ledger were supposed to be the same. The merchant would list any money made or lost on a sale in another category, "profit and loss," to make the books balance.
Spread of Double-Entry Bookkeeping. Italian merchants were the first to adopt double-entry bookkeeping, and by the 1400s the system had spread throughout Italy. It took some time for merchants in other countries to begin using the double-entry system. Records from France, Holland, and Germany indicate that the single-entry system was still common in the mid-1400s. Only after 1500 did double-entry bookkeeping become widespread throughout Europe.
Some scholars believe that double-entry bookkeeping was a major factor in Europe's move from feudalism* to capitalism* because it enabled merchants to calculate profits and losses. Others disagree, saying that merchants could have done this using single entry. A third view is that the two developments influenced each other. Expanding trade produced the need for more efficient bookkeeping systems. At the same time, the double-entry system encouraged the growth of commerce by making it easier to keep track of increased trade activity.
