Double-entry bookkeeping[edit]

Main articles: Luca Pacioli and Double-entry bookkeeping system

In eighth century Persia, scholars were confronted with the Qur’an's requirement that Muslims keep
records of their indebtedness as a part of their obligation to account to God on all matters of their
life.  This became particularly difficult when it came to inheritance, which demanded detailed
accounting for the estate after death of an individual. The assets remaining after the payment of
funeral expenses and debts were allocated to every member of the family in fixed shares, and
included wives, children, fathers and mothers. This required extensive use of ratios, multiplication
and division that depended on the mathematics of Hindu-Arabic numerals.
The inheritance mathematics were solved by a system developed by the medieval Islamic
mathematician Muhammad ibn Musa al-Khwarizmi (known in Europe as Algorithmi from which we
derive "algorithm").  Al-Khwarizmi's opus “The Compendious Book on Calculation by Completion and
Balancing” established the mathematics of algebra, with the last chapter devoted to the double-entry
bookkeeping required for solution to the Islamic inheritance allocations. [18]  Al Khwarizmi's work was
widely circulated, at a time that there was substantial active discourse and trade between Arabic,
Jewish and European scholars. It was taught in the learning centers of Al-Andalus in Iberia, and from
the tenth century forward, slowly found its way into European banking, which began slipping Hindo-
Arabic numerals into accounting books, despite their prohibition as sinful by the medieval church. 
Bankers in Cairo, for example, used a double-entry bookkeeping system which predated the known
usage of such a form in Italy, and whose records remain from the 11th century AD, found amongst
the Cairo Geniza.[19] Fibonacci included double-entry and Hindo-Arabic numerals in his Liber Abaci
which was widely read in Italy and Europe.  
Al-Khwarizmı's book introduced al-jabr meaning "restoration” (which European translated as
"algebra") to its inheritance accounting,  leading  to  three fundamental accounting - algebreic
concepts:

1. Debits = Credits: algebraic manipulations on the left-hand and right-hand size of an

equal sign had to "balance" or they were in error. This is the algebraic equivalent of
double-entries "bookkeeping equation" for error control.
2. Real accounts: These included assets for tracking wealth, weighed against liabilities
from the claims of others against that wealth, and the difference which is the owner's
net wealth, or owner's equity.  This was al-Khwarizmi's "basic accounting equation".
3. Nominal accounts: These tracked activity that affected wealth, and the "restoration"
into the real accounts reflected accounting's closing process and the calculation of
the owner's increment in wealth -- net income.
Algebra balances and restores formulas on the left and right of an equal sign.   Double-entry
bookkeeping similarly balances and restores debit and credit totals around an equal sign. 
Accounting is the balancing and restoration of algebra applied to wealth accounting. [20]
In 756, The Abbasid Caliph Al-Mansur sent scholars, merchants and mercenaries to support the
Tang dynasty's Dukes of Li to thwart the An Shi Rebellion. The Abbasids and Tangs established an
alliance, where the Abbasids were known as the Black-robed Arabs. The Tang Dynasty's extensive
conquests and polyglot court required new mathematics to manage a complex bureaucratic system
of tithes, corvee labor and taxes.  Abbasid scholars implemented their algebraic double-entry
bookkeeping into operations of many of the Tang ministries. The Tang dynasty expanded their
maritime presence across the Indian Ocean, Persian Gulf, and Red Sea, and up the Euphrates
River.[21]  On land they conquered much of what is today's China.
The Tangs invented paper currency, with roots in merchant receipts of deposit as merchants and
wholesalers. The Tang's money certificates, colloquially called “flying cash” because of its tendency
to blow away, demanded much more extensive accounting for transactions.  A fiat currency only
drives value from its history of transactions, starting with government issue, unlike gold and specie. 
Paper money was much more portable than heavy metallic specie, and the Tang assured its
universal usage under threat of penalties and possibly execution for using anything else.
The Tangs were great innovators in the widespread use of paper for accounting books, and
transaction documents. They evolved the eight century Chinese printing techniques involving
chiseling an entire page of text into a wood block backwards, applying ink, and printing pages by
inventing early movable type, including characters chiseled in wood and the creation of ceramic print
blocks. Tang science, culture, manners and clothing were widely imitated across Asia.  Japan's
traditional dress, as well as customs like sitting on the floor for meals, were borrowed from the
Tangs.  Imperial ministries adopted the Tang's double-entry bookkeeping for administration of taxes
and expenditures. The Goryeo kingdom (the modern name "Korea" derives from Goryeo) donned
the imperial yellow clothing of the Tangs, used the Three Departments and Six Ministries imperial
system of the Tang dynasty and had its own "microtributary system" that included the Jurchen tribes
of north China.  The Tang's double-entry bookkeeping was essential to managing the complex
bureaucracies surrounding Goryeo tribute and taxation. [22]
Later dispersion of knowledge of double-entry can be attributed to the rise of Genghis Khan and later
his grandson Kublai Khan who were deeply influenced by  the bureaucracy of the Tang  Dynasty.
The accountants were the first to enter a city conquered by Mongols, tallying up the total wealth of
the city, from which the Mongols took 10%, to be allocated between the troops.  Cities were
conquered, then encouraged to remain going-concerns. Double entry bookkeeping played an
important role in assuring the Mongols were fully informed about taxes and expenditure. [23]
Ratios, division and multiplication were difficult with Roman numerals, and were achieved though a
method called "doubling."[24]  Similarly, addition and subtraction involved an error-prone rearranging
of Roman numerals. None of this lent itself to double-entry bookkeeping, an as a result, medieval
Europe lagged Eastern and Central Asia in adopting double-entry bookkeeping. Hindu-Arabic
numerals were known in Europe, but were those who used them were considered in league with the
devil.  The prohibition of Hindu-Arabic mathematics was incorporated into statutes proscribing the
use of anything but Roman numerals.  That such statutes were necessary is an indication of the
attractiveness to merchants of double-entry bookkeeping.  Fibbonaci’s book Liber Abaci
disseminated knowledge about double-entry and Hindu-Arabic numerals widely to merchants and
bankers, but because editions were hand copied, only a small group of people actually had access
to its knowledge, primarily Italians. The earliest extant evidence of full double-entry bookkeeping
appears in the Farolfi ledger of 1299–1300. [7] Giovanno Farolfi & Company, a firm
of Florentine merchants headquartered in Nîmes, acted as moneylenders to the Archbishop of Arles,
their most important customer.[25] The oldest discovered record of a complete double-entry system is
the Messari (Italian: Treasurer's) accounts of the city of Genoa in 1340. The Messari accounts
contain debits and credits journalised in a bilateral form and carry forward balances from the
preceding year, and therefore enjoy general recognition as a double-entry system. [26]