Double-Entry Bookkeeping and the Use of the Bill of Exchange as a Clearing Instrument in the Early Modern Age

Abstract

This paper discusses the relationship between double-entry-bookkeeping (DEB) and the use of the bill of exchange as a clearing instrument by Italian banks working on commission in 16th century Lyon, prior to the development of endorsement. Using the archives of one of the first banks of Lyon (Salviati), I demonstrate that DEB as an intellectual technique and a principle of governance both enabled and limited the use of the bill of exchange for clearing purposes. On the one hand, such use of the bill of exchange resulted from the application of DEB concepts of mediated and compound offset to exchange transactions performed on commission, which appeared as the “exchange equivalent” of previous book transfer practices. DEB as a tracking system also facilitated the monitoring of multilateral clearing. However, commission bills contained greater potential for clearing than was enabled by the DEB system of offset, and the necessity to record these bills in a DEB system prevented them from being exploited to their full clearing potential.

Keywords: Double entry bookeeping; bills of exchange; international clearing mechanisms; commission trading