In 1593, the Dutch mathematician Simon Stevin tried to teach Prince Maurice of Nassau the art of bookkeeping. Nonetheless, merchants and governments were slow to adopt good accounting practices. Pacioli’s work circulated widely in Europe in the 16th century. Only a trained mathematician could do this, he warned, for it took mental stamina. Pacioli described how merchants lived with the constant tension of having to record all the day’s transactions in a journal, and then rigorously put them into a ledger. In a 1494 treatise, Luca Pacioli of Venice first explained the basic principle of double-entry bookkeeping: the separate calculations of the sums of credits and debits had to equal the final account of capital. In the late Middle Ages and Renaissance, accountants received training in family firms that required monk-like self-discipline. confronted this past year and too often, they have kept bad books and gone bankrupt.Įarly pioneers of financial management recognized the inherent anxiety brought on by keeping account books.
Over the centuries, monarchs, merchants and housewives have all faced the same problems that companies like Lehman Brothers and A.I.G. It is both a consolation, but also a terrifying fact that those who are terrible at keeping accounts are not alone. I had spent too long off the books, and I couldn’t face it.Ī 2005 study by Lloyds Trustee Savings Bank of Britain showed that accounting anxiety has led to “balance denial syndrome,” in which bank customers so fear being in the red that they systematically ignore their bank statements. As I waited in my accountant’s office, I realized why I had lost sleep the night before: for the first time in a year, I had to make a reckoning not just of my place in the financial meltdown, but also in my own economic universe my successes, failures and ultimate weaknesses. I myself was reduced to a nervous wreck last April trying to figure out my taxes, even though I had just finished writing a study of the history of accounting. New regulations are all well and good, but why haven’t we been able to master the excellent rules of bookkeeping we’ve had for centuries? The answer may be as much a matter of psychology as economics: the fear of bad news often leads to bad accounting. AMONG the reforms approved by the House Financial Services Committee on Thursday was an amendment allowing a systematic risk council to suggest new regulations on financial and corporate accounting.
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