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QuickBooks 2013 For Dummies by Stephen L. Nelson, MBA, CPA

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What Does an Italian Monk Have to Do with Anything?

So far, I’ve provided narrative descriptions of all the financial events that affect the balance sheet and the income statement. I describe how you started the business with $5,000 of cash (a $4,000 loan from your mother-in-law and $1,000 of cash that you yourself invested). At an even earlier point in this appendix, I noted how you rented a boat to the Hamsters for $200 and they paid you in cash.

Although the narrative descriptions of financial events — such as starting the business or renting to the Hamsters — make for just-bearable reading, they are unwieldy for accountants to use in practice. Partly, this awkwardness is because accountants are usually (or maybe always?) terrible writers. But an even bigger problem is that using the lots-and-lots-of-words approach makes describing all the little bits and pieces of information that you need difficult and downright tedious.

Fortunately, about 500 years ago, an Italian monk named Lucia Pacioli thought the same thing. No, I’m not making this up. What Pacioli really said was, “Hey, guys. Hello? Is anybody in there? You have to get more efficient in the way that you describe your financial transactions. You have to create a financial shorthand system that works when you have a large number of transactions to record.”

Pacioli proceeded to describe a financial shorthand system that made it easy to collect all the little bits and pieces of information needed to prepare income statements ...

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