Business Events Drive Accounting
Wednesday, January 12, 2022 at 02:51PM
Charlie in Digital Financial Reporting

I am doing some brainstorming which I have summarized in this document, Accounting Basics (Brainstorming). Thank you to Willi Brammertz who is behind ACTUS (Algorithmic Contract Types Unified Standards) who helped me understand all this better per his use of standard financial contracts.

The bottom line is this: 

  1. Business event patterns exist. (Another name for business event might be Economic Event.)
  2. Business events drive accounting transactions.
  3. It is at the business events level that you want to apply expert systems functionality to assist those entering accounting transactions.

Another piece of this puzzle I am trying to piece together is REA or Resource-Event-Agent patterns.  This video, REA Models, provides an introduction to REA. This video, Introduction to REA, provides another good introduction.  Finally, this video, REA, provides another good introduction. (This appears to be the origional REA academic paper.)

Wikipedia points out that REA is popular when teaching accounting information systems but is rare in actual accounting systems implementations with a few exceptions.  One thing REA seems to be trying to do is get rid of the double entry bookkeeping model.  That is a BIG MISTAKE in my view.  They don't seem to grasp that the double entry bookkeeping model was created to detect errors and differentiate errors from fraud.  REA also seems to be used to design accounting systems databases.

I see REA as being valuable in a different place: understanding and documenting business events that exist (or economic events might be a better name) for the purpose of building expert systems functionality for entering the accounting transactions.

So I had been focused on record-to-report. That focus could be wrong.  The proper focus might be from business event to report.

More to come...so stay tuned.

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