Distributed ledger technology is by some believe to be the accounting system of the future, replacing the centuries old doubleentry accounting paradigm, as it has desirable characteristics such as tamper-resistance. However, it might su er from technology lock-in as double-entry bookkeeping, due to its long standing history, has o ered the conceptual foundations for many laws, regulations and business practices. While some of these laws, regulations and practices might become obsolete as a result of distributed ledger technology, some might still prove to be valuable in a new technological context. While aiming at unlocking the potential of distributed ledger technology in an accounting context, we also want to preserve the wisdom of accounting craftsman. For this reason, it is the aim of this paper to o er a bi-directional mapping between traditional double-entry bookkeeping and innovative paradigms that have proven their value in decentralised systems, of which distributed ledger technology is an exponent. This paper o ers such a mapping for the Resource-Event-Agent paradigm.
1.1
The Need for Collaborative Accounting
The collaborative economy [
We intend to formally validate the coherence of the ontology- mapping with Formal Concept Analysis.[10] Figure 1 visualises a lattice that allows of identifying the intent and extent of a construct in a formal ontology.
In a later phase we intend to implement the mapping in a real-world system in accordance with the Action Design Research research paradigm. [11] 3
In this section we map REA2, which has been demonstrated to cover both
dependent views of trading-partners in a collaboration space and the perspective of
any independent observer [
Figure 2 shows the REA value chain as represented in REA2 on the outside
and fundamental accounting notions at the center of the gure. It shows that an
Acquisition Duality is operationalised by an Liability in accounting terms.
When a purchase : economic event occurs, the inventory of the
viewpointde ning economic agent (i.e. self : economic agent) increases. This increase
in raw material : inventory can be booked as an asset increase (i.e. debit),
for which the double in the journal entry is a : liability increase (i.e. credit).
This liability can then be settled by a requiting cash-disbursement : economic
event. This cash-disbursement decreases the cash : inventory (i.e. (i.e. credit), for
which the double in the journal entry is a : liability decrease (i.e. debit) that
settles the liability generated by the purchase : economic event. As such, in
the acquisition cycle, the : liability operationalises the second REA axiom
\All events e ecting an out ow must be eventually paired in duality relationships
with events e ecting an in ow and vice-versa." [
When consuming raw material : inventory, as shown by the consume : economic event in gure 2, the raw material : inventory decreases (i.e. credit), for which the double in the journal entry is a : cost increase (i.e. debit, and an equity, which is a subtype of liability, decrease). When the Conversion Duality produces final product : inventory, this is booked by means of a 4 https://www.xbrl.org/the-consortium/get-involved/gl/ produce : economic-event journal-entry in which the final product : inventory increase (i.e. debit) has a revenue increase (i.e. credit, and an equity, which is a subtype of liability, increase) as a double.
A sale : economic event that decreases the nal product : inventory (i.e. credit), while its double in the journal entry is a : UOMe (i.e. You owe me, as a subtype of asset) increase (i.e. debit). The acquisition duality is then established by settling the : UOMe by means of a cash-receipt: economic event that increases the cash : inventory (i.e. debit), for which the double in the journal entry decreases the : UOMe (i.e. credit). 4
Although the formalisation of the mapping will require considerably more research and e ort, the pattern in gure 2 already leads to the following observations: { The REA-construct economic event is a sub-type of the double-entry bookkeeping construct journal entry { The double-entry bookkeeping construct inventory, which is a subtype of the double-entry bookkeeping construct asset, is related to the notion of custody in REA { debits make the view-de ning self : economic agent richer (e.g. inventory increase, liability decrease, cost increase (i.e. liability decrease)) { credits make the view-de ning self : economic agent poorer (e.g. inventory decrease, liability increase, revenue increase (i.e. liability increase)) { alternation debits and credits enforce a clockwise value ow in the REA value-chain from the perspective of the view-de ning economic agent (i.e. the shareholder) as shown in gure 2 9. Morgan, J.: Why the collaborative economy is changing everything. online (october 2014), http://www.forbes.com/sites/jacobmorgan/2014/10/16/why-thecollaborative-economy-is-changing-everything/#772df9114fc1 10. Priss, U.: Formal concept analysis in information science. Annual review of information science and technology 40(1), 521{543 (2006) 11. Sein, M., Henfridsson, O., Purao, S., Rossi, M., Lindgren, R.: Action design research. Management Information Systems Quarterly 35(1), 37{56 (2011) 5
Traditional Accounting with Decentalised Ledger Technology
debit amount has has
timestamp Pdebit-Pcredit=0
REA
/balance balance=Pdebit-Pcredit has has
credit amount
increase decrease
Double-Entry
Cost+ Double-Entry Liability+ Double-Entry LiabilityDouble-Entry
UOMe+ Double-Entry
UOMeDouble-Entry
Asset+
REA Economic Event Double-Entry
Credit become a "neat" meta-model for it