Beginnings of reserves in accounting
Journal Title: Zeszyty Teoretyczne Rachunkowości - Year 2012, Vol 2012, Issue 67
Abstract
The article presents the aims and procedures connected with the creation of reserves in the early stages of accounting development. The double-entry system was developed by Italian merchants and bankers in the Middle Ages. The account-books that are still preserved reveal that medieval companies reached a very high level of technical proficiency, manifested with the presence in account-books of clear examples of reserves. The oldest reserves were found in the XIV century account books of Perruzzi and Alberti company. However, from the point of view of aims and procedures connected with reserves, the account books of two famous medieval companies – Datini and Medici – are the most valuable. It was a standard policy of companies to set up provisions for accrued wages, bad debts, and unforeseen contingencies before dividing any profits. By means of this procedure profits were deliberately reserved and allowed to accumulate in the form of surplus. Creation of reserves was often prescribed in articles of association, which stipulated that profits were to be divided among the partners only after making due provision.
Authors and Affiliations
Katarzyna Klimczak
Keywords
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