the rea-invention of double entry bookkeeping - moving accounting back to the center of enterprise...
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Thank you for inviting Bill & me
across
The REA-invention of Double Entry Bookkeeping:
Moving Accounting Back to the Center
of Enterprise Information
Architectures
&
In the spirit of Ghent
The Ghent Altarpiece (Het Lams Gods)
Let’s go back a few years to ?
In the year 1432
• Gutenberg’s printing press was impending, and the advanced use of Hindu-Arabic numbers was becoming prevalent in Europe. Technological Imperative
• Copernicus and Columbus had not yet been born, but it was the dawn of the Renaissance and the Age of Discovery. Increasing trade ventures were causing “a blizzard of transactions” that needed accurate and reliable documentation and stewardship. Commercial Imperative
• Where was accounting (enterprise information systems) in the 1400s?
– Accounting had been around in various locales for 3,000 years already in the form of tokens, clay jars, and sticks. There are even claims that accounting caused the invention of writing.
– Counting artifacts preceded van Eyck by thousands of years.
– In Italy, double-entry accounting had already started in the 1300s (reached Bruges soon thereafter) .
– Double-entry spread faster once books were available detailing its operation. Technological Imperative
In his Summa in 1494, Luca Pacioli codified the Venetian method of bookkeeping which had
evolved to deal with the blizzard of commercial transactions at the dawn of the Renaissance and
the Age of Exploration. Trading ventures he mentions include those with the cities of Antwerp
and Bruges.
Luca Pacioli – “Father” of Accounting
• Debit – from Italian
“debito” -- owed to the
proprietor
• Credit – from Italian
“credito” – owed from the
proprietor
• BOOKS:
– Memorandum
– Journal (L)
– Ledger (G)
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
(reality)
Surrogates (accounting
system)
notched
stick
Agrarian Age
“ transactional
memory external
to the parties of
the exchange”
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
(reality)
Surrogates (accounting
system)
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
Luca Pacioli & double-entry
accounting (1494) spread
throughout Europe and
beyond. Engineered
accounting artifacts
facilitated this change and
evolution.
notched
stick
Agrarian Age
“ transactional
memory external
to the parties of
the exchange”
Path-Creation Design
Double-Entry Accounting
Recording and Counting
Technologies.
Systematic Accuracy and
Reliability
LEGEND
Path-Creation Change
Path-Dependent Change
Innovation: Creation of New
Artifacts (Technological Imperative)
Changing Business
Models and Expectations (Commercial Imperative)
Accounts, Journals
and Ledgers
Semantic Web
Technologies
Technological Imperative
Commercial Imperative
Path-Dependent
Design
Documentation and
Stewardship
Counting & Calculating Methods
Narrative descriptions and
single-entry records
Hindu-Arabic Numerals and
Arithmetic Advances
SOURCE: Geerts & McCarthy
Fast forward to the last 50 years
(1962 – 2012)
• Technological Imperatives:
– Computers, advanced tracking technologies,
markup languages, database semantics, etc.
• Commercial Imperatives:
– Efficiency, multidimensionality,
comprehensiveness, interoperability, etc.
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
“ transactional
memory external to
the parties of the
exchange”
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
“ transactional
memory external to
the parties of the
exchange”
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
“ transactional
memory external to
the parties of the
exchange”
What happens to modern
computer systems when you
“pave these cow-paths” ??
Accounting systems through the ages
Enterprise Economic Activities (Events) Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
“ transactional
memory external to
the parties of the
exchange”
X
What’s wrong with the traditional accounting system? (why not pave the cowpaths ??)
• Its dimensions are limited (need multidimensional focus)
• Its classification schemes (CoA) are not always appropriate (need
more semantic focus on modeling of reality)
• Its aggregation level is too high and predetermined (determined by
closing, adjusting, and costing procedures)
• Its degree of integration with other systems is limited (need links with
types, commitments, and other data from supply chain, production,
marketing, human resources, etc.)
Source
document
M/Files and
general ledger
Financial
Statements
Accounting engineering artifacts
gone bad
• Crazy code block expansions
• Period costing & matching
• Absorption costing
• Activity-based accounting (G/L
centered)
• LIFO, SoYD
• Grundrechnung ?
Inventory $$$$$
account balance
Inventory Inventory
Type Color $$$$$
account-code balance
Inventory Inventory
Type Size Distribution
Channel Color --- $$$$$
account-code balance
Sales-
person Customer
FOR EXAMPLE: ACCOUNT-CODING of
ECONOMIC PHENOMENA
see Vandenbosscheeter and Wortmann
(REA Workshop 2006)
double-entry accounting
Enterprise economic
phenomena
double entry sludge
Path-Creation Design
Double-Entry Accounting
Recording and Counting
Technologies.
Systematic Accuracy and
Reliability
LEGEND
Path-Creation Change
Path-Dependent Change
Innovation: Creation of New
Artifacts (Technological Imperative)
Changing Business
Models and Expectations (Commercial Imperative)
Accounts, Journals
and Ledgers
Technological Imperative
Commercial Imperative
Path-Dependent
Design
Documentation and
Stewardship
Counting & Calculating Methods
Automated Reasoning
Narrative descriptions and
single-entry records
Hindu-Arabic Numerals and
Arithmetic Advances
Database Technologies
Computers Semantic Web
Technologies
Markup Languages
Advanced Tracking
Technologies
Multidimensionality and Integration Independent
Interoperability
Transaction and Master Files (GL)
XBRL GL
Efficiency
Temporal and
Granular Comprehensiveness
Facet-Coded
Accounts
Digital Single Entry
Activity-Based Costing
SOURCE: Geerts & McCarthy
Enterprise Economic Activities Principal
jar
notched stick
Agrarian Age
source document
computer files and General Ledger
Financial statements
Industrial Age
memorandum
Journal .
A/ Rec …. Sales…
Ledger .
ooo
Mercantile Age
Surrogates
“ transactional
memory external to
the parties of the
exchange”
going beyond the bookkeeping to
natural language descriptions
Accounting Systems Evolution
Enterprise Economic Activities Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
Economic storytelling
with semantic models of
value creation by firms
Financial
Reporting
View
Other
Views of
Enterprise
Event-chains
Enterprise Systems
Age
“ transactional
memory external
to the parties of
the exchange”
Cookie-Monster (the customer) and Elmo (the entrepreneur) meet in the (real or virtual) marketplace, thus setting the
stage for an Economic Exchange
Cookie-Monster and Elmo engage in a SALE (transfer of Cookie Inventory)
Cookie-Monster and Elmo engage in a PAYMENT (transfer of Cash)
accounts-receivable
1.00
sales
1.00
cash
1.00
1.00
cost-of-goods-sold
.80
inventory
.80
ELMO sold cookie
COOKIE-MONSTER
ELMO received cash
COOKIE-MONSTER
Economic Resource
insideParticipate
stock-flow
Economic Agent
Economic Agent
Economic Event
outsideParticipate
Economic Resource
insideParticipate
stock-flow
Economic Agent
Economic Agent
Economic Event
outsideParticipate
insideParticipate
stock-flow
Economic Agent
Economic Agent
Economic Resource
Economic Event
duality
Modeling requited transactions with REA patterns
outsideParticipate
Economic Resource
Economic Event
Economic Agent
Economic Agent
stock-flow
outsideParticipate
insideParticipate
<<Economic Agent>>
Customer
customerNumber
customerName
discountPerCent
receivableBalance
updateReceivableBalance()
Stockflow
lineItemQuantity
lineItemPrice
0..* 1..1
<<Economic Resource>>
Cookies
productNumber
description
currentUnitPrice
unitCost
calculateUnitCost()
<<Economic Event>>
Sale
invoiceNumber
numberOfLineItems
saleAmount
discountedAmount
costOfGoodsSold
calculateNumberOfLineItems()
calculateSaleAmount()
calculateDiscountedAmount()
calculateCostOfGoodsSold()
WholesaleCustomer
mainWarehouseCity
tellAboutSelf()
RetailCustomer
statusCategoryCode
statusCategoryName
tellAboutSelf()
outsideParticipate
1..*
0..*
1..1
1..1
Product# Description Price Cost
P-1 Chocolate Chip
1.05 .90
P-2 Chocolate 1.00 .80
P-3 Peanut Butter
.95 .78
P-4 Pecan 1.10 .94
Invoice#
Payment Timestamp
Amount Applied
I-1 2JUL0830 14.75
I-2 3JUL0800 2.00
I-2 5JUL0800 18.00
I-3 8JUL1145 6.00
I-4 8JUL1200 1.00
C-999 E-1234 3JUL 10.95 I-3
C-987 E-1234 5JUL 1.00 I-4
C-888 E-1234 2JUL 20.00 I-2
C-987 E-1234 1JUL 14.75 I-1
Buyer# Seller#
Date
Sale Amount
Invoice#
Product# Invoice# Quantity
P-2 I-1 5
P-3 I-1 10
P-2 I-2 20
P-4 I-3 9
P-1 I-3 1
P-2 I-4 1
COOKIE
SALE
COOKIE-stockflow-SALE
SALE-duality-CASH_RECEIPT
An accounting database
Cost
11.80
16.00
9.36
.80
Product# Description Price Cost
P-1 Chocolate Chip
1.05 .90
P-2
Chocolate 1.00 .80
P-3
Peanut Butter
.95
.78
P-4 Pecan 1.10 .94
Invoice#
Payment Timestamp
Amount Applied
I-1 2JUL0830 14.75
I-2 3JUL0800 2.00
I-2 5JUL0800 18.00
I-3 8JUL1145 6.00
I-4 8JUL1200 1.00
C-999 E-1234 3JUL 10.95 I-3
C-987 E-1234 5JUL 1.00 I-4
C-888 E-1234 2JUL 20.00 I-2
C-987 E-1234 1JUL 14.75 I-1
Buyer# Seller#
Date
Sale Amount
Invoice#
Product# Invoice# Quantity
P-2 I-1 10
P-3 I-1 5
P-2 I-2 20
P-4 I-3 9
P-1 I-3 1
P-2 I-4 1
COOKIES
SALE
COOKIES-stockflow-SALE
SALE-duality-PAYMENT
Cost
11.80
16.00
9.36
.80
Story of why this invoice amount to $14.75 ??
Adding temporal and granular expansion, process phases,
and business events to REA
Business
Process governs
Economic
Agent to-participate
from-participate Economic
Event
Economic
Resource
stock-flow
duality
Economic
Event Type
Economic
Agent Type
specifies
specifies
typify
typify
policy
bundles
Business
Event
Business
Process
Phases
workflow Value/Supply
Chain
networked
Economic
Agreement
Economic
Commitment
fulfills
Economic
Resource
Type
specifies
reciprocal typify
policy
38
Accept Customer Contact
Assess Customer Needs
Check Car File & Choose
Assess Insurance Options & Credit
Fill in Contract
Customer Pays
Find Car & Provide Keys
Return Car
Update Files
Check Out Car
Payroll
Process
Cash
Acquisition
Process
Cash
Labor
Labor
Maintenance
Process
Cash
Labor
Labor
Car
Car
Revenue
Process
Cash
Maintained Car
Labor Labor
Exchange
Customer
Car Maintained Car
Labor
Cash
Revenue
Rental
Contract
Rental
Agent
Customer
Cash
Receipt Cash
Cashier
REA – 3-level architecture
Economic
Event
Economic
Resource Economic
Agent
stockflow fromParticipation
toParticipation
Economic
Commitment reciprocal
fulfill
duality
Resource
Type
typifiy specify
Event Type
Agent Type
specify
specify
typify
typify
participate
policy
policy
policy
trigger
responsibility
component
Resource Event Agent
In philosophy and computer science, an ontology is a formal
representation of a set of concepts within a domain and the
relationships between those concepts. It is used to reason about the
properties of that domain, and may be used to define the domain
(Wikipedia).
Ontology Summit 2011
Communique
Fundamentally, ontology is about reaching agreements on what things mean and putting it in machine-processible
form. In an enterprise, this represents a radically different way to express meaning. The usual way is for meaning to be scattered throughout the organization in people’s heads, in email, in no-longer maintained requirements
documents, in conceptual models, etc. … Ontology both forces and enables an organization to be clear about
what things mean and in doing so, gets everyone on the same page. Equally important, formally representing meaning enables automated inference which helps to
reduce unnecessary complexity, improve reliability and increase agility.
Business
Process
Business
Process
Business
Process
Enterprise #1
Business
Process
Business
Process
Business
Process
Enterprise #3
Enterprise #2
Business
Process
Business
Process
Business
Process
Collaboration Space Perspective: Trading Partner vs. Independent
Independent view of
Inter-enterprise events
Trading Partner view of
Inter-enterprise events
(upstream vendors and
downstream customers)
Dotted arrows represent flow of goods, services, and cash between
different companies; solid arrows represent flows within companies
SOURCE: Adapted from ISO/IEC 15944, 2007
Buyer Seller
Third Party
Collaboration Space
Value Exchange
Japan expert contribution to 15944-4, 9 May 2002, Seoul Korea
Accounting Systems Evolution
Enterprise Economic Activities Principal
Surrogates
jar
notched
stick
Agrarian Age
source
document
computer
files and
General
Ledger
Financial
statements
Industrial Age
memorandum
Journal .
A/ Rec ….
Sales…
Ledger .
ooo
Mercantile Age
Economic storytelling
with semantic models of
value creation by firms
Financial
Reporting
View
Other
Views of
Enterprise
Event-chains
Enterprise Systems
Age
Economic storytelling
of interoperable
communities of firms
Semantic Web
Age
Collaboration
Space
“ transactional
memory external
to the parties of
the exchange”
Economic
Event
Economic
Resource
Economic
Agent
stock-flow from
to
Economic
Agreement
Economic
Commitment
Economic
Claim
materializes
settles
fulfills
establish
duality
Economic
Resource
Type
typify specifies
Economic
Event Type
Economic
Agent Type
specifies
specifies
typify
typify
reciprocal
Business
Process governs
Business
Event
Business
Process
Phases
workflow
aggregate
Independent view of
exchange events
Trading Partner view of exchanges Trading Partner view of conversions
1. Planning—Identification-Negotiation-
Actualization-Post-actualization phases
2. inside/outside participate
3. inflow/outflow stockFlow
4. 1-to-1, 1-to-n, n-to1, m-to-n duality
5. other
1. Planning—Negotiation-Actualization-
Post-actualization phases
2. inside only participate
3. use--produce stockFlow
4. n-to-1 dualities
5. other
REA
ontology
REA
enterprise
ontology
(Coase)
meronymic
0..* 1..1
PK
receive
duality
provide
0 ..*
stockflow
{incomplete, disjoint}
«EventType» ExpeditionType
- expeditionTypeName PK - expedExpectedTimeLength - standardUndiscountedSlotFee - expeditionTypeCapacity
«EconomicResource» SupplyItem
- supplyItemTypeNumber PK - supplyItemPrice - supplyItemQOH-
«EconomicResourceType» SupplyItemCategory
- supplyItemCategoryName PK - monthlySaleAmountOfSIC
«EconomicAgentType» EmployeeType
- employeeType PK - startingWageForEmpType - countOfEmployeesForType
«EconomicEvent» Expedition
- expeditionNumber PK - slotsFilledForScheduleExped - actualDuration - scheduledExpeditionDate
«EconomicEvent» ExpeditionTicket
- ticketNumber PK - discountedSlotCharge - total$AmountOfSupplyItems - countOfSlotsOnThisTicket
«EconomicResourceType» AircraftType
- aircraftTypeName PK - aircraftSeatingCapacity - aircraftFuelCapacity
«EconomicResource» Aircraft
- aircraftEngineNumber PK - dateAircraftManufactured - aircraftName CK -
«EconomicAgent» Employee
- employeeNumber PK - employeeName
«EconomicAgent» ExpeditionWorker
- employeeNumber PK
«EconomicAgent» Guide
- employeeNumber PK - dateQualifiedAsAGuide
«EconomicAgent» BookingAgent
- employeeNumber PK - bookingAgentCommRate
«EconomicAgent» Pilot
- employeeNumber PK - dateOfInitialPilotLicense
«EconomicAgentGroup» People
- peopleName PK - approximatePopulation
«EconomicAgent» Client
- clientNumber PK - clientName
«EconomicEvent» Payment
- remittanceAdvceNum PK - $AmountOfRemitAdvice - clientCheckNumber
«BusinessLocation» Location
- locationName PK - locationMapCoords CK
distance
- distanceBetween policy-sequence
- sequenceOfLocationOnTour
policy- qualifies
- hoursFlown
stockFlow
- quantityOfItemOnThisTicket
policy-count
- countOfEmployeeType
«EconomicResource» Cash
- cashAccountNumber PK - cashAccountBalance receive
provide
participate stockflow
participate
participate
policy
policy
typify
typify
typify
0 ..*
0 ..*
0 ..*
site
0 ..*
0 ..*
0 ..*
0 ..*
0 ..* 0 ..*
0 ..*
0 ..*
0 ..*
1..1
0 ..*
0 ..* 0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
1..*
1..*
1..*
0 ..*
0 ..*
0 ..*
0 ..*
0 ..*
1..1
1..1
0..1
1..1
1..1
1..1
1..1
0..1 0 ..*
0 ..*
lead
group group
0 ..* 0 ..*
0..1 0..1
0 ..*
typify
0..1
start finish
Typed REA model for exchange business process
- manufacturingRunNumber PK - actualTotalT&MCost - toDateRunLaborCost - toDateRunMaterialCost - actualQuantityProduced
«EconomicEvent» Manufacturing Run
-operationTypeName PK
-standardSequence
«EventType»
Operation Type
- employeeTypeName PK
- startingWage
«AgentType»
Employee Type
- scheduledOperationNumber PK
- scheduledSequence
«EconomicCommitment»
Scheduled Manufacturing Operation
quantityOfRawMaterialPerUnit
policyBM
- scheduledMinutes
specify1
- minutes
participate
- minutesUsed
used
- laborMinutesPerUnit
policyOL
-standardUnitCost -qOH
«EconomicResourceType»
Raw Material Type
-rawMaterialCatalogNumber PK
- minutesNeededPerUnit
policyTM
-dateAcquired
«EconomicResource»
Raw Material
-rawMaterialTagNumber PK
-quantityOwned
«EconomicResourceType»
Tool-Machine Type
-toolMachineTypeDescription PK
-standardUnitCost
-qOH
«EconomicResourceType»
Medical Equipment Type
-medicalEquipmentCatalogNumber PK
-standardGramWeight
-dateAcquired
«EconomicResource»
Tool-Machine
-toolMachineNumber PK
-totalMinUsedSinceAcquis
- scheduledMinutes
specify
- scheduledQuantity
specify
- productionOrderNumber PK - budgetedTotalLaborCost - budgetedTotalMaterialCost
- projectedQuantityProduced
«EconomicCommitment»
Scheduled Manufacturing Run
- budgetedTotalTool&MachineCost
- quantityUsed
used
- minutes
participate
- minutes
participate
- initiationTimestamp PK
- actualDuration
«EconomicEvent»
Manufacturing Operation
- actualSequence
duality
participate
specify
produce
participate
typify
policyBM
fulfill
1..1
1..*
-medicalEquipTagNumber PK
-actualGramWeight
«EconomicResource» Medical Equipment
- employeeNumber PK
- employeeName
«EconomicAgent» Employee
- wage - dateHired
- employeeNumber PK
«EconomicAgent» Machinist
- employeeNumber PK
«EconomicAgent» Assembler
- employeeNumber PK
«EconomicAgent» Electrician
- employeeNumber PK
«EconomicAgent» Scheduler
- employeeNumber PK
«EconomicAgent» Supervisor
reciprocal
fulfill
typify
typify
typify
consume
participate
specify specify
1..1
1..1
1..1
1..1
1..1
0..*
0..*
0..* 0..*
0..*
0..*
0..*
0..*
0..* 0..*
0..*
0..1
0..1
0..1
0..1
0..1 0..1
1..*
1..*
1..* 1..*
1..*
1..*
1..*
{complete, disjoint}
0..*
0..*
0..*
0..*
0..*
0..*
0..*
1..1
1..1
1..1
1..1
1..*
1..*
1..*
0..*
0..*
0..*
0..*
0..* 1..1
1..1
0..*
1..*
1..*
typify
1..1
0..*
conversion
business process
Path-Creation Design
Double-Entry Accounting
Recording and Counting
Technologies.
Systematic Accuracy and
Reliability
LEGEND
Path-Creation Change
Path-Dependent Change
Innovation: Creation of New
Artifacts (Technological Imperative)
Changing Business
Models and Expectations (Commercial Imperative)
Accounts, Journals
and Ledgers
Technological Imperative
Commercial Imperative
Path-Dependent
Design
Documentation and
Stewardship
Counting & Calculating Methods
Automated Reasoning
Narrative descriptions and
single-entry records
Hindu-Arabic Numerals and
Arithmetic Advances
Database Technologies
Computers Semantic Web
Technologies
Markup Languages
Advanced Tracking
Technologies
Multidimensionality and Integration Independent
Interoperability
Transaction and Master Files (GL)
XBRL GL
Efficiency
Temporal and
Granular Comprehensiveness
Facet-Coded
Accounts
Digital Single Entry
Activity-Based Costing
SOURCE: Geerts & McCarthy
Path-Creation Design
Double-Entry Accounting
Enterprise Value Chain
Recording and Counting
Technologies.
Systematic Accuracy and
Reliability
LEGEND
Path-Creation Change
Path-Dependent Change
Innovation: Creation of New
Artifacts (Technological Imperative)
Changing Business
Models and Expectations (Commercial Imperative)
Accounts, Journals
and Ledgers
Multidimensionality and Integration
Database Technologies
Independent Interoperability
Computers
Integrated Repository with Minimal General
Ledger
Semantic Web
Technologies
Transaction and Master Files (GL)
XBRL GL
Technological Imperative
Commercial Imperative
Path-Dependent
Design
Documentation and
Stewardship Efficiency
Temporal and
Granular Comprehensiveness
REA Accounting
Model
Counting & Calculating Methods
Facet-Coded
Accounts
Automated Reasoning
REA Enterprise Ontology
Digital Single Entry
Narrative descriptions and
single-entry records
Integrated Value Chain,
Business Process, and
WorkFlow Descriptions
Hindu-Arabic Numerals and
Arithmetic Advances
Markup Languages
Activity-Based Costing
Advanced Tracking
Technologies
SOURCE: Geerts & McCarthy
Positive REA (study what is)
Enterprise Economic Activities
jar
notched stick
Agrarian Age
source document
computer files and General Ledger
Financial statements
Industrial Age
memorandum
Journal . A/ Rec …. Sales…
Ledger .
ooo
Mercantile Age
Economic storytelling
with semantic models of
value creation by firms
Financial Reporting
View
Other Views of Enterprise Event-chains
Enterprise Systems Age
Economic storytelling
of interoperable
communities of firms
Semantic Web Age
Normative REA (beyond prototypes)
Fully-implemented,
REA-directed,
enterprise system Accumulation of
engineering
expertise &
implementation
experience
Standards work with ebXML,
UN-CEFACT (UMM module)
and ISO Open-edi (accounting
& economic ontology)
Hoping for the REA “golden spike” where the
positive (ecologically rational) and the normative
(rationally designed) meet
Where are we today in technology?
Where are will we be in 15 years?
REA monograph – proposed outline
1. The original REA model
a. REAs & accounting ontology
b. the switch to an independent view
2. Granular expansions
a. Up to Value Chains and Value Systems (supply chains) and down to
workflow (state machine)
b. Fit to Theory of the Firm (Coase) – same pattern
i. Exchanges
ii. Conversions
c. The economic component structures of resources (Lancaster) and agents
(need to identify an economic source)
3. Temporal expansions
a. What could be or should be (types, standards, budgets)
b. What is planned or scheduled (commitments and contracts)
c. Business Process phases – Tie workflow to state changes and business
events
4. Needed expansions
a. Claims – tied to Financial Instrument Business Ontology
b. Materialization of account balances
c. Internal controls – Tie to scripts for integrity constraints
5. Future directions and open issues
a. Evaluative (positive)
i. Behavioral
ii. Railway spike (where normative and positive meet in actual
practice)
b. Design (normative)
c. Tie to other accounting work – XBRL-FR and IMA managerial roadmap
An Expanded Vision for Accounting
double-entry accounting
Enterprise economic
phenomena
REA-engineered accounting
systems
Any questions
??
The REA-invention of Double Entry Bookkeeping:
Moving Accounting Back to the Center
of Enterprise Information
Architectures
Path-Creation Design
Double-Entry Accounting
Enterprise Value Chain
Recording and Counting
Technologies.
Systematic Accuracy and
Reliability
LEGEND
Path-Creation Change
Path-Dependent Change
Innovation: Creation of New
Artifacts (Technological Imperative)
Changing Business
Models and Expectations (Commercial Imperative)
Accounts, Journals
and Ledgers
Multidimensionality and Integration
Database Technologies
Independent Interoperability
Computers
Integrated Repository with Minimal General
Ledger
Semantic Web
Technologies
Transaction and Master Files (GL)
XBRL GL
Technological Imperative
Commercial Imperative
Path-Dependent
Design
Documentation and
Stewardship Efficiency
Temporal and
Granular Comprehensiveness
REA Accounting
Model
Counting & Calculating Methods
Facet-Coded
Accounts
Automated Reasoning
REA Enterprise Ontology
Digital Single Entry
Narrative descriptions and
single-entry records
Integrated Value Chain,
Business Process, and
WorkFlow Descriptions
Hindu-Arabic Numerals and
Arithmetic Advances
Markup Languages
Activity-Based Costing
Advanced Tracking
Technologies
SOURCE: Geerts & McCarthy
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