We observed 5 transactions in our earlier exercise and if were to set aside the words and simply look at the numbers, it would appear as follows:
At first glance, everything seems to be working just fine and you might think: “All I can see is some addition and subtraction. So, what is the issue? It’s all just basic math, right?”
Yes, it is except … it was not so basic in 1494’s Europe. In put it in clearer terms, Europeans did not accept the existence of negative numbers during the time Luca, the Father of Accounting, was creating the Double Entry System. So, No Subtraction!
The system we use for accounting, for the mathematics of business, did not include Subtraction – a very basic concept of math – at the time it was created.
Let that sink in: The Double Entry System of Accounting, at the time it was created, did NOT include Subtraction (Negative Numbers); a very basic concept of mathematics.
Quite the Irony, right?
This also begs the question: “So, what is the solution to this subtraction problem? And, what did Luca do? How did he make things work?”
We’ll meet to discuss the solution in the next snippet.
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