The Economic Value of Debits = Credits

52 Pages Posted: 2 Jan 2018 Last revised: 17 Jun 2018

See all articles by Sudipta Basu

Sudipta Basu

Temple University - Department of Accounting

Gregory B. Waymire

Emory University - Department of Accounting

Date Written: May 11, 2018


We explore why double-entry bookkeeping (DEB) initially displaced single-entry bookkeeping (SEB) as an accounting system in thirteenth-century Italy. We argue that, even when no financial statements are produced, basic DEB routinely produces more precise and timely data on transaction-specific profits than SEB. The DEBITS=CREDITS constraint unique to DEB alters transaction analysis to emphasize monetary values, wealth changes, profit measurement, and future contingencies. Repeated use of DEB-based transaction analysis sharpens mental models of economic exchange by strengthening feedback from the more precise and timely profit data to entrepreneurial strategic and operating decisions. DEB works like eyeglasses that lets an entrepreneur more accurately distinguish ex ante between transactions for products that generate small profits versus those that yield small losses, while this boundary was fuzzier under SEB. This small improvement for a single transaction scales to very large profit differences when large organizations like Amazon or Walmart transact billions of times every year.

Keywords: Double-entry bookkeeping, economic exchange, profit measurement, discovery process

JEL Classification: M41, D23, D83, B15

Suggested Citation

Basu, Sudipta and Waymire, Gregory B., The Economic Value of Debits = Credits (May 11, 2018). Available at SSRN: or

Sudipta Basu

Temple University - Department of Accounting ( email )

Philadelphia, PA 19122
United States
215.204.0489 (Phone)
215.204.5587 (Fax)

Gregory B. Waymire (Contact Author)

Emory University - Department of Accounting ( email )

Goizueta Business School
1300 Clifton Road
Atlanta, GA 30322
United States
404-727-6589 (Phone)
404-727-6313 (Fax)

Here is the Coronavirus
related research on SSRN

Paper statistics

Abstract Views
PlumX Metrics