Introduction
Luca Pacioli invented a system that has not lost its relevance for more than half a millennium. Considering that every day all areas of science and technology, including those quite approximate and related to accounting – such as algebra, systems analysis, and computational mathematics – are making an increasing leap forward in a given period of time since the 15th century, this method is continues to be implemented in many institutions.
Discussion
In addition, accounting has become an integral part of almost any business, and therefore the widespread use of such methods leaves open the question of optimization and creation of a better approach, given the capabilities of some companies. However, in the current realities, given the more complex structure of financial transactions and capital diversification, double entry in its classic form is losing its relevance in large corporations. Financial reporting is subject to more multi-criteria accounting methods: today there are cash accounting and accrual accounting, which are regulated by GAAP and IFRS standards (Imhanzenobe, 2022). These complex methods cannot be described by a single equation of assets and liabilities, which was used by Luca Pacioli. They consist of a fairly large number of separate operations and calculation standards, representing accounting as a multi-component system that includes many more variables.
Conclusion
However, the contribution of Luca Pacioli even to modern accounting methods cannot be underestimated. Assets and liabilities, described in the balance sheet of the financial statements of many companies, are a direct reflection of the debit and credit in double entry, with the difference that they are balanced with the help of equity. The foundations of double entry are laid down in both the cash and accrual methods.
Reference
Imhanzenobe, J. (2022). Value relevance and changes in accounting standards: A review of the IFRS adoption literature. Cogent Business & Management, 9(1), 2039057. Web.