Accounting by, and for, the Dutch

July 2, 2014 7:57 AM

The Vanished Grandeur Of Accounting, in which Jacob Soll argues that it was the Dutch, and certainly not the Venetians or Florentines who are responsible for the spread of that moral and mathematical revolution: double-entry accounting.

Bread, Butter and Bookkeeping

European urban civilization as we know does not find its roots in London or Paris, let alone in Berlin, but in three relatively small cities, all ports, all energetic, individualistic, and outward-looking places. These cities, in the chronology of their commercial and creative flourishing, were Venice, Antwerp, and Amsterdam. In each of these cities a strong tradition of printing developed and they all produced outstanding printers, Aldus in Venice, Plantin in Antwerp, and the Blaeu family in Amsterdam. That is no coincidence. Creativity – interpreted in the widest possible sense – and cosmopolitanism go hand in hand.

posted by the man of twists and turns (15 comments total)

Transparency became a cultural ideal worthy of art.

Would be marvellous if that were the case today. Instead we have Enron, Bernie Madoff and sub-prime mortgages.
posted by arcticseal at 8:11 AM on July 2, 2014

A shout out for Genoa, whose bankers were rich enough to finance Charles V in keeping together the Holy Roman Empire. They get less coverage in part because they were less showy with their gains, didn't believe in frittering them away in frippery and festivals. Hard headed people, the Genoese, and possibly the inventors of double entry.

Prof. Giuseppe Felloni has been doing interesting work in their purely financial activities.
posted by BWA at 8:22 AM on July 2, 2014

Would be marvellous if that were the case today. Instead we have Enron, Bernie Madoff and sub-prime mortgages.

This won't be popular, but it's my understanding that US Accounting practices are far better than much of the world's in terms of transparency. By a large margin. Are things perfect? Not at all, but Madoff, Enron and Sub Prime mortgages aren't truly accounting failures. I'd say they're more systemic failures brought about by rollbacks in regulations designed to root out and prevent corruption and investor abuse.

I would argue that what you point out is indeed a failure of capitalism, however, of which accounting is the cornerstone. But I'm going to say that US accounting practices are pretty strong when a company is actually making something or offering a demonstrably valuable service; in the instances you mentioned, these are really finance tricks that hide corporations/people who offer no valuable services or products.

I'm not an accountant, but I do work with accountants on a regular basis. I do welcome a response pointing out why I'm wrong here.
posted by glaucon at 8:24 AM on July 2, 2014 [3 favorites]

Not traditionally on the syllabus of Accounting 101, Christie Malry's Own Double-Entry is nevertheless an excellent introduction to the principles, by way of a darkly comic novel by B.S. Johnson.
posted by chavenet at 8:37 AM on July 2, 2014 [1 favorite]

....I do welcome a response pointing out why I'm wrong here.

This wasn't meant to sound like a challenge, I meant it more as, "if I'm wrong, show me!" Because I like to learn and there are some smart folks here!
posted by glaucon at 8:37 AM on July 2, 2014

Mod note: Would maybe be good to not let a post about the historical development of accounting practices turn immediately into an argument about contemporary US financial disasters.
posted by cortex (staff) at 8:38 AM on July 2, 2014 [6 favorites]

I do welcome a response pointing out why I'm wrong here.

The un-welcome response would be you are on the right track.

That track also has a lack of accountability for the people who hold the public trust. Who's been fired, lost their pensions or jailed for not doing the task of regulation the public asked for?

Considering the lack of willingness to charge people for lying in court when it is a civil matter - what is the incentive for telling the truth when legally required?
posted by rough ashlar at 8:43 AM on July 2, 2014

Paging MartinWisse. He has posted another one, and, even worse, its Netherlands-related!
posted by marienbad at 9:37 AM on July 2, 2014 [1 favorite]

All I have to say is duh.

Us Dutch (and Flemish) are long used to having our inventions and discoveries ripped off and ascribed to those oh so trendy Italians or worse, taken for English innovations. What are we, Chinese?
posted by MartinWisse at 9:44 AM on July 2, 2014 [2 favorites]

It's funny how easy it is to fall into the attitude Soll talks about. Nicely balanced accounts are a satisfaction unto themselves. Unbalanced accounts become a dissonance that cannot be tolerated.

There's nothing like being asked, "How much did we spend on X?" and being able to quickly provide not only that answer but the contra which proves it out, and have them balance to the penny. Seriously, carve "His work balanced to the penny" on my tombstone. That's an epitaph one can honestly be proud of.

I'll tell you one thing I cant get over though: How many places basically couldn't function without making daily manual journal entries. I always think of making a journal entry as a big deal, because it means that there's an error somewhere in your accounts. The last few outfits I've seen routinely just run in a journal entry to make stuff foot and think nothing of it. Drives me right up the wall.



P.S. If you're a non-accountant that wants to understand debits, credits, and the fundamentals of accounting, especially for small businesses, Accounting Comes Alive is worth the 99¢.

Just remember it's heresy to bring up among CPAs because of the author's trademarked color method of differentiating which are accounts are debits and which are credits and how the sides of a t-account affect each. The explanations of basic accounting are great though.
posted by ob1quixote at 10:24 AM on July 2, 2014 [3 favorites]

P.S. If you're a non-accountant that wants to understand debits, credits, and the fundamentals of accounting, especially for small businesses, Accounting Comes Alive is worth the 99¢

I'm almost done with a first pass of an accounting 101 e-book to prep for some coursework in the fall and have had some quality time with double-entry accounting this summer. I've found most of the material interesting, but I keep getting tripped up by the concepts of debit and credit, which really mean left and right more than "debit" and "credit" most of the time. I can never remember which side I am supposed to use for an transaction. So, ima buy that book.
posted by Alison at 11:10 AM on July 2, 2014

Accounting Comes Alive...by Peter Frampton?
posted by Iridic at 11:59 AM on July 2, 2014 [2 favorites]

I know, right?
posted by ob1quixote at 4:49 PM on July 2, 2014

Alison:

One of the reasons that stuff is hard to pick up is that they teach the Accounting Equation wrong. Instead of Assets on the left by itself, learn it as:

A + W + E = L + OE + R

The reason I suggest that is because the normal entry for any non-contra account is on the same side in your ledger as it is in your equation. For example, any given Expense has a normal debit, so you usually write on the left instead of the right, just as Expenses is on the left of the above equation.
posted by parliboy at 6:46 PM on July 2, 2014 [2 favorites]

Seems like a bit of 'you may have invented it, but I made it famous' argument here. Given what I've read of economic history, I doubt anyone disputes that Amsterdam was a financial center of the era; England essentially imported the central bank concept from Amsterdam, and the Dutch in turn adopted the East India Company, which directly led to the first stock exchange. Lots of ideas were being traded to and fro.

As for accounting itself, I picked up GNUCash in grad school when I somehow had enough surplus cash that opening a Roth was feasible, under the logic that 'linux professionals use this to track their finances, and I'm a professional, so imma use this too'.

It's pretty simple, really. I doubt I'd pass a CPA exam, and I'd probably have to study to pass Accounting 101 due to the terminology and software-specific idiosyncrasies I may have picked up. But I can pretty much prepare my own taxes on Jan 1 and wait for the forms to show up now, and the experience should help out when dealing with corporate accountants.
posted by pwnguin at 10:51 PM on July 2, 2014