On this day in economic and financial history ...

Some innovations are so critical to the modern world that we can't imagine life without them. Computers, refrigeration, vaccines ... and double-entry accounting. On Nov. 10, 1494, Italian mathematician Luca Bartolomeo de Pacioli published the Summa de arithmetica, geometrica, proportioni, et proportionalità. It was the first published record of the double-entry accounting, which was used by Renaissance merchants of the day, and formed the basis of the modern accounting system still in use today.

Without a codified and standardized form of accounting, modern capitalism simply couldn't exist. Pacioli's text offered the rest of the world its first glimpse of a balance sheet full of assets and liabilities, and an income statement with income and expenses. Without modern accounting, it's quite possible we might be stuck trading beads for chickens on the side of a dirty street.

Some people were better at accounting than others
Of course, a standardized form of accounting is only as good as the ethics of those who use it. One such ethical failure took place at MCI WorldCom, which took shape on Nov. 10, 1997, when WorldCom and MCI announced the terms of their $37 billion merger. At the time, it was the largest corporate merger in U.S. history, but this record would soon be eclipsed by the truly monstrous mergers that took place during over the next few years.

MCI WorldCom's rise and fall closely tracked the rise and fall of the dot-com bubble, with a criminal denouement. When the merger was announced, the Dow Jones Industrial Average (DJINDICES:^DJI) stood at 7,552. By the time MCI WorldCom began doing business 10 months later, the Dow had reached 8,024, and it was off like a rocket from there. MCI WorldCom's high-water mark came nearly two years later, when it attempted a $129 billion merger with what is now Sprint Nextel (NYSE:S), which would have leapfrogged the combined company over AT&T (NYSE:T) as the largest U.S. telecom company. At this point, the Dow had risen past 10,000. In a foreshadowing of AT&T's later antitrust struggles during its pursuit of T-Mobile, the Department of Justice put the kibosh on the deal. The end of the merger effort, on July 13, 2000, came very near the peak of the dot-com bubble, when the Dow was at 10,789. It was all downhill from there for the rebranded WorldCom.

WorldCom CEO Bernard Ebbers came under significant pressure from margin calls shortly after the Sprint merger failed. By this point, WorldCom executives had already been cooking the books for months. The fraudulent accounting practices ballooned into a multibillion-dollar accounting scandal, which was uncovered in 2002. By mid-2002, WorldCom had no choice but to declare bankruptcy, earning it the dubious honor of being, at various points in time, both the largest merger in U.S. history and the largest bankruptcy in U.S. history.

The remaining WorldCom, renamed MCI again in 2003, exited bankruptcy in 2004 and was acquired by Verizon (NYSE:VZ) in 2005. Bernard Ebbers was sentenced to prison five months after Verizon acquired the shell of his former company. He will not be eligible for parole until 2028.

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