“Money of Account” – accounting, account balancing, bookkeeping, credit-debit

Keynes opened the first volume of the Treatise on Money with a definitional distinction between “money” and “money of account.” It was the latter that primarily interested him. Money of account, he explained, was the unit in which debts (defined as contracts for deferred payment) were expressed.80 Money itself was merely the tool by which such debts were discharged—be it “by word of mouth or by book entry on baked bricks or paper documents”—or through which purchasing power could be held.81 From this fundamental observation Keynes derived two main points. First, for debts to be discharged through money they first must have been expressed in terms of a money of account. To focus on the substance of money thus missed the underlying network of credit and units of account. To think that the value of currency somehow derived from the value of its material was “like confusing a theatre ticket with the performance.”82 Instead, a relationship in which a debt was incurred preceded the exchange of what was commonly seen as money. Put differently, money of account denoted a particular kind of debt relationship that was logically and historically prior to the market. The second point Keynes emphasized was the way in which this framing of money in terms of debts and contracts immediately introduced custom and the law, and with them the state and the community, into any discussion of monetary affairs. Not only did the state enforce property rights to ensure the delivery of money contracts, it also decided what it was that must be delivered as “a lawful or customary discharge of a contract which has been concluded in terms of the money of account.”84 It was the state, therefore, that set the money of account.”

Eich, Stefan. The Currency of Politics (pp. 150-151). Princeton University Press. Kindle Edition.

penguin.com.au/ 2014 The Reckoning: Financial Accountability and the Making and Breaking of Nations – A bold retelling of economic history reveals the central role of accounting in the rise and fall of nations – Jacob Soll

In The Reckoning, award-winning historian Jacob Soll shows how the use and misuse of financial bookkeeping has determined the fates of entire societies. Time and again, Soll reveals, good and honest accounting has been a tool to build successful companies, states and empires. Yet when it is neglected or falls into the wrong hands, accounting has contributed to cycles of destruction that continue to this day. Combining rigorous scholarship and fresh storytelling, The Reckoning traces the surprisingly powerful influence of accounting on financial and political stability, from the powerful Medici bank in 14th century Italy to the 2008 financial crisis.

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gfmag 2014 Book Review: The Reckoning – by Valentina Pasquali

It has inspired works of art, including poetry, paintings and woodcarvings; made and destroyed immense fortunes, from the De Medici’s in Renaissance Florence to Philip II’s in 16th century Spain; it even sparked the French Revolution. It is not power, or money or love. This magic driver of history is, roll of the drums, the somewhat unintelligible, unexciting discipline of accounting. This, in a nutshell, is the rather persuasive argument presented by University of Southern California history professor Jacob Soll in his new book The Reckoning: Financial Accountability and the Rise and Fall of Nations (Basic Books, out April 29).

“Capitalism and government, it seems, have flourished without massive crises only during distinct and even limited periods of time when financial accountability functions,” Soll writes, explaining the key tenet of his chronicle of some 2,000 years of bookkeeping, inventories and auditing. A lesson that we have yet to learn in full if we consider how this story culminates in such present-day accounting scandals as the one that brought down energy company Enron in 2001 and in the murky dealings that led to the 2008 financial crisis.

The Reckoning is a remarkable feat of research by Soll—who, in 2011, was the recipient of a MacArthur “Genius” award—though he skims so quickly through such large chunks of history that the book, at times, reads as a bit of a laundry list of names and events. The author credits the Roman Republic and the Roman Empire under emperor Augustus with an early interest in accounting-like practices and dates the birth of double-entry accounting , which he elevates to the discipline’s purest form, to 14th century Tuscany and Northern Italy. “Without double-entry accounting, neither capitalism [nor] the modern state could exist, for it is the essential tool in calculating profit and loss, the basis of financial management,” he writes.

In Soll’s retelling of history through the lens of accounting, somewhat obscure but endlessly fascinating characters take center stage. With their heads buried in numbers and ledgers, they made crucial contributions to the development of this practice and thus to the betterment of the world. Take, for example, the wealthy Tuscan merchant Francesco di Marco Datini, who built and managed a successful international trading firm in the late 1300s. “To see all of Datini’s books together is to see the birth of modern finance and the information age,” writes Soll. “Datini’s books make him familiar: a businessman of numbers, data and paperwork.” Or take Jean-Baptiste Colbert, who meticulously served Louis XIV, France’s Sun King, as finance minister and was later praised for his work by none other than Adam Smith. Smith “admired Colbert, foremost for his skill as a financial manager, tax collector . . . and accountant,” and lauded his “success in ‘introducing method and good order into the collection and expenditure of the publick revenue.'”

Soll’s book is chock-full of valuable snippets of information. For example, that “the word ‘audit’ comes from a time when rulers and lords listened to, rather than saw, their accounts.” And it makes a point of highlighting the still-unresolved tension between political leaders and their accountants: The former depend on the latter for their success but don’t always want them too close, as good financial management and accountability allows societies to thrive but makes it more difficult for officials to meddle and use a state’s finances as a tool for power plays.

But Soll doesn’t fail to notice the double-edged nature of accounting, not always a force for good. In fact, accountants have often been seen as having an ambiguous role, as “they could aid capitalism and government or, through cooked books, impede them both.”


kirkus 2014 Book Review: The Reckoning

Soll’s (History/Univ. of Southern California; The Information Master: Jean-Baptiste Colbert’s Secret State Intelligence System, 2009, etc.) double-entry bookkeeping in relation to the political and cultural significance of accounting and the rise and fall of nations and businesses.

In his historical analysis, the author examines why modern societies consistently find themselves mired in crises involving not only financial issues, but political accountability as well. Different than entries in a checking account register, double-entry bookkeeping tracks credits and debits in separate columns, thus permitting real-time accounting of the costs and profits associated with particular and aggregated transactions. The author argues that it allows effective management through accountability and auditing. He contends that successful nations have not only been rich in accounting and commercial culture, but have also learned how to build cultural frameworks that have countered the all-too-human tendency to ignore, deceive or falsify. Soll substantiates his thesis by tracing the history of the method from its beginnings, showing how it was used successfully, and then disregarded disastrously, by Florence’s de Medici family and, later, France’s Louis XVI. The author credits Luca Pacioli’s 1494 Treatise as the enduring source that permitted the technique to be adapted for public policy, beginning with the Dutch republic. Some of the founders of the United States, including Robert Morris and Alexander Hamilton, also used the method. Soll stresses the cultural benefits of incorporating accounting into educational curricula during the 19th century, and he explores how standards have been lowered over time, starting with railroad barons’ failures to adequately pay to replace aging equipment and ending with the current concept of mark-to-market, in which financial assets are worth what others will pay for them.

An intriguing, well-crafted discussion highlighting a major contribution to political and economic well-being, with an obvious moral for today.


medium 2014 Book Review: The Reckoning by Jacob Soll by Edwin Setiadi – 5 stars.

Never knew that accounting can be this interesting. This book tells the greatest stories on the evolution of accounting. All of the crucial people, all of the manipulation and missed opportunities were all told in an engaging style of writing, while slowly describing most of the functions of accounting. An observant reader with no prior accounting knowledge would eventually understand the basics of bookkeeping while learning who initiate the law and why he initiated it.

The book is filled with stories of men like Luca Pacioli, whom considered as the father of accounting. He argued that the merchants is the key figure in a republic, because they “could count, calculate and manage abundances and war, famine and pestilence” and because “they were disciplined and vigilant managers of both business and government.”

There’s also Robert Walpole, the First Lord of the Treasury, Chancellor of the Exchequer, and Britain’s first Prime Minister that was probably the original Robin Hood, due to his reputation as a wily master of state finance.

And then there’s Frederick Winslow Taylor, whom revolutionized the industrial and labour efficiency, and inspired the making of Harvard Business School, inspired Henry Ford, interested by Stalin and Lenin, and admired by Hitler.

But the best feature for me got to be the detailed stories of the great historical figures and how they use accounting as one of their success formula, From Cosimo de Medici, the Sun King and his finance minister Jean-Babtise Colbert, to Benjamin Franklin, to the founders of PriceWaterhouse, Ernst & Young, and McKinsey.

Indeed, the book directly highlight how the discipline level of bookkeeping slowly became the core foundation for a businesses and/or nations, and can eventually make or break an empire. I never knew that accountants have such a central role in the world, as the impartial referee between business and government dedicated to numbers and orders.

The author can also delightfully relate all the activities of the men who made and shaped the Renaissance, into the many paintings about them. And explains the paintings’ rich back stories, the intentions, and even experts’ interpretations of them.

It’s not easy researching on how the big names in history deal with their accounting books. But yet the author can manage to find credible references for it and re-tell the facts in a good flow of writing that make this “boring subject” into a very interesting narrative.


prospect 2014 Book review: The Reckoning by Jacob Soll By John Kay

If Prospect held a competition for the most improbable conjunction of author and quotation, my entry would pair Goethe with the observation that “the system of book-keeping by double entry is among the finest inventions of the human mind.”

Historian Jacob Soll develops the case that double entry ranks with gravitation, calculus and relativity, as he uses the history of accounting to provide insight into business and political history. Accounting has Sumerian origins, but only the emergence of tractable numbering systems—imagine financial statements with Roman numerals and no zero—made effective book-keeping possible. The invention of double-entry accounting by Genoese merchants allowed the evolution of modern finance. Soll sees accounting as the key to accountability. Louis XIV discontinued Colbert’s elaborate book-keeping system because the monarch could not bear the evidence of his own extravagance. Soll draws an analogy with the fictitious accounts provided by modern Sun Kings in the first decade of the new millennium. Public accounting is a powerful antidote to autocracy, Soll argues—Hitler dismissed most of the accounting staff of the Reichsbahn. Goethe’s Wilhelm Meister protests that “you begin by the form as if it were the matter; traders commonly, in their additions and borrowings, forget what is the net result of life.” To which his interlocutor responds that “form and matter are in this case one.” We cannot live without finance and accountability: but nor can we live only for them.


wsj 2014 Book review: The Reckoning by Jacob Soll By James Grant Rulers used to go broke through ignorance. Today there is no such excuse. Accountants are everywhere.
– It’s shirtsleeves to shirtsleeves for great empires, prosperous city-states and the member companies of the Dow Jones Industrial Average. Debt or sin or war or the tax man finally lays them low. Now comes Jacob Soll with a new theory of the decline and fall of earthly institutions. He fingers the accountants. According to the author of “The Reckoning,” successful societies—while they last—are those that properly cast their figures. They confront their liabilities as well as their assets. In their enterprise and politics, accountability is the watchword—until one misfortune or another sets the red ink to overflowing. …”…

New York’s national-debt clock on 10-2008

New York’s national-debt clock on 5-2022