Download Business Transaction View

Bringing Accounting into the E-Commerce Age
with REA-Based Collaboration Patterns and
Monitored Commitments
William E. McCarthy – Michigan State University
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AIS Scope
Business Processes and Value
Chains
Commitments and Types
E-Commerce Collaboration
Standards
ebXML electronic business XML
REA’s Importance in a Wider
Accounting Context
Range of Accounting Systems
Bringing Accounting into the E-Commerce Age with
REA-Based Collaboration Patterns and Monitored
Commitments
Keynote address given on 1 July 2002 to
The Accounting Information Systems Educators Association
Copper Mountain, Colorado
William E. McCarthy – Michigan State University
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Much of the content of these slides comes from co-authored papers
and my own standards group work with the UN-CEFACT ebXML group
and the ISO Open-edi groups, so the ideas are due to many people
besides myself. These include Guido Geerts, Julie David, Bob Haugen,
John Yunker, Jim Clark, Brian Hayes, Paul Levine, Jamie Clark, Dave
Welsh, Karsten Riemer, Nita Sharma, Nenad Ivezic, Colin Clark,
Katsuhiro Morita, Jake Knoppers, and many others too numerous to
mention.
These slides may be reproduced, but please do not change the
contents or attributions.
Extending the Scope of AIS
MANAGEMENT
INFORMATION
SYSTEMS
Distinguishing
Feature =
Transaction
Processing for
Accountability
Purposes
(original REA)
Extend with
Commitments
and Types for
Planning &
Policy
Purposes
•Management Science
•Behavioral & Organizational
Science
•Supply Chain
•Computer Science
ACCOUNTING
INFORMATION
SYSTEMS
•Financial Reporting
ACCOUNTING
•Managerial Decision Making
•Auditing & Control
•Taxation
Source: JIS editorial, 1989
EXAMPLE BUSINESS PARTNERS
• Company C is “Cookie Monster” or an instance
of Customer at the end of a supply chain in the
e-marketplace for cookies
• Company E is “Elmo” or an instance of an
Entrepreneur who acquires the factors of production
(cookie dough, chocolate chips) in the e-marketplace,
converts them internally to a final product of cookies,
and then sells them in the e-marketplace
• Company K is “Kermit” or an instance of a Komponent
Supplier who takes agricultural essentials like wheat
or cocoa beans, converts them into the components of
cookies like cookie dough or chocolate chips, and then
supplies those components to cookie manufacturing
entrepreneurs in the e-marketplace
Source: Muppet site
BUSINESS PROCESS DEFINITION: A business
process is a set of activities that takes one or
more types of inputs and turns them into an
output of greater value to the customer
(Hammer)
cookie
Exchange or
Transformation
cash
$$
Cash
payment
$$
Cash
payment
$$
raw materials
$$
payment
purchase
labor
$$
$$
logistical
operation
labor
acquire
payment
facilities, services
& technology
labor
delivered raw manufactured
materials
goods
labor
material
issue
manufacture
operation
payment
service
acquire
$$
Example Value Chain
(source,
make, _______
deliver)
______ ______
shipment
manufacture
job
sale
labor
service
operation
delivered
manufactured goods
service
contract
payment
product services
Source: ebXML BP Catalog
$$
Cash
receipt
$$
Cash
paymnt
$$
raw materials
$$
payment
purchase
labor
$$
$$
logistical
operation
labor
acquire
payment
facilities, services
& technology
labor
delivered raw manufactured
materials
goods
labor
material
issue
manufacture
operation
payment
service
acquire
$$
Example Value Chain
(per Porter and SCOR)
shipment
manufacture
job
sale
labor
service
operation
delivered
manufactured goods
service
contract
cash rec
product services
Source: ebXML BP Catalog
Economic
Resource
Economic
Event
Economic
Agent
duality
Source: W. E. McCarthy “The REA Accounting Model: A Generalized Framework for Accounting
Systems in a Shared Data Environment,” The Accounting Review, July 1982, pp 554-78.
Economic Resource
Economic Agent
Economic Event
Economic Agent
INITIATING
RESPONDING
Economic Agent
Economic Event
Economic Resource
Economic Agent
Source: G Geerts and W. McCarthy
Commitment &
Type Extensions
Economic
Contract
commitment
to ship
executes
cookie
shipment
commitment
to pay
executes
cash
payment
Source: G Geerts and W. McCarthy
cocoa beans
cookies
to chocolate chips
Cash
payment
Cash
Cash
payment
payment
shipment
shipment
shipment
chocolate chips
Recipe
step
walnuts
cookie dough
labor
Batch
run
cookies
Cookie Supply
Chain
Source: R. Haugen and W. McCarthy
Types
Resource
Event
Agent
Type
Type
Type
Economic
Economic
Economic
Resource
Event
Agent
Source: G Geerts and W. McCarthy
Examples of Type Images
(typification)
• Resources
like cookies can be classified into
different groups with varying shelf lives
• Events like sales can be grouped into types like
retail or wholesale with different price
structures
• Agents like customers can be typed into groups
like intermediaries or end users with
different certification requirements
Two Kinds of Business Modeling
• Descriptive: This illustrates what is
actually occurring (OLD ACCOUNTING)
• Prescriptive: This illustrates what could
be or should be occurring (NEW
ACCOUNTING (some progress))
Some Proposed Collaboration
Patterns
• Negotiation
• Order-Fulfillment-Settlement
– E.G. 2/10 net 30, FOB source
• Long Term Contract with Periodic
Releases
• Escalating Commitments
• Supplier Cascade
• Drop Shipment
• International Payment and Shipment
Source: ebXML BCP&MC
Extended BP model
Planning
Identification
REA components
Types of Resources
& Agents
typification
Negotiation
Commitments for
Types of Resources
fulfillment
Actualization
Post-Actualization
Economic Events
with Resources &
Agents
Source: ISO Open-edi
E-Commerce Collaboration
Standards
• ebXML (electronic business XML) – United
Nations CEFACT and Oasis
• eBTWG – UN CEFACT
• UBL – OASIS (nee xCBL from CommerceOne)
• ISO Open-edi
• European Commission (ECIMF)
• Others – BPML, RosettaNet etc.
• Industry Specific (AIAG, Odette, etc.)
Electronic Collaboration –
Old (bottom-up) and New (top-down)
• OLD technology is EDI (electronic data interchange)
• EDI has standard documents or transaction sets @ to
X12 (American) or EDIFACT (everywhere else)
• NEW technology is XML
– Bottom-up  xCBL or UBL (don’t throw away EDI legacy)
– Top-down  ebXML BCP&MC (let’s innovate with full
support for business process semantics)
XML standards groups
• XML is always the foundation technology
– Establishes the rules & syntax
• XML standards are essentially agreements among groups of
people in a domain that define an XML tag set and a Schema
for a particular purpose (a.k.a. “vocabularies”)
– XBRL (eXtensible Business Reporting Language)
– ebXML (electronic business XML)
• Ontologies & Taxonomies are implemented as specific
interpretations or classes of XML standards (e.g., REA
accounting ontology or the US commercial-industrial
taxonomy for financial reporting)
• Instance documents are actual documents using a particular
ontology or taxonomy
Ontology
• “A specification of a conceptualization”
Gruber
• A listing of the categories or classes in a
certain domain and the ways they relate to
each other
consumes
scenario
Economic
Resource
Type
follows
scenario
Economic
Resource
typifies
Business
Event
Type
participates
scenario
Economic
Agent
Type
typifies
typifies
follows
linkage
characterization
participates
consumes
association
characterization
Business
Event
association
Economic
Agent
typifies
stockflow
consists
of
accountability
Economic
Event
Claim
initiator
Agreement
(contract or
schedule)
materializes
settles
forms
involves
terminator
duality
Agreement
Type
(contract or
schedule)
governs
executes
Commitment
aggregate
of
initiator
terminator
reciprocity
aggregate
of
Economic
Contract
Business Process
(exchange or
conversion)
reserves
aggregate
of
typifies
Business Process
Type (exchange or
conversion)
Source: ISO Open-edi
ebXML -- 101
Between company interoperability
BP
Business
Collaboration
Business Transactions
Business Documents
Business Messages
Source: ebXML BPSS
C
E
X
Y
Customer
ProductSupplier
LogisticsVendor
Bank
PO
RA
AA
FreightOrder
AA
AdvanceShipNotice
RA
FundTransferAdvice
AA
FundsTransferNotice
RA
AdvanceShipNotice
AA
ShippingDocument
AdvanceShipNotice
RA
ReceivingAdvice
RA
FundTransferAdvice
AA
FundsTransferNotice
RA
Business Process: MultiParty Collaboration
Source: ebXML BPSS
ebXML vision
• A global electronic market place where enterprises
of any size, anywhere can:
– Find each other electronically
– Conduct business through the exchange of XML based
messages
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•
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Using standard message structures
According to standard business process sequences
With clear business semantics
According to standard or mutually agreed trading partner
agreements
• Using off the shelf purchased business applications
• TEAMS: BP, CC, TP, security, messaging
services, architecture, QC, etc.
Source: ebXML
Collaborative Process – Interactions
1
Collaboration
Protocol Profiles,
Business Process
Models (BPSS)
XML
3
Collaboration
Protocol Profiles
4
Collaboration
Protocol Profiles,
Business Process
Models (BPSS)
5
Collaboration
Protocol Agreement
1
Business Scenarios
Business Profiles
COMPANY E
Request Business Details
2
ebXML
Registry
3
Register Implementation Details
Register COMPANY A Profile
Build Local System
Implementation
4
5
6
COMPANY C
ebXML compliant
system
Source: ebXML
Vision of ebXML Collaboration Process
Business Process,
Core Components
Process
Reengineering
Process
Definition
Process
Evolution
Process
Management
Business
Process
Management
Registry/
Repository
Partner
Discovery
Electronic
Business
Collaboration
Process
Execution
Partner
Sign-Up
Electronic
Plug-in
Transport/Routing/
Packaging, Collaboration
Protocol Agreement
Business Service Interface
Collaboration
Protocol Profile
Collaboration
Protocol Agreement
Business Service
Interface
Source: ebXML
ebXML Business Process & Information Meta-model
(top-down controlled complexity)
Business Area
Business Operations Map (BOM)
Process Area
Partner Type
Business Process
Business Collaboration
(binary or multiparty)
Agreement
Economic Event
Economic
Resources
Business Requirements View (BRV)
Authorizing
Roles
Business
Documents
Network
Component
Requesting
Business Activity
Business Transaction
Business Transaction View (BTV)
Business Messages
Business Service View (BSV)
Responding
Business Activity
Requesting Service
Transaction
Responding Service
Transaction
Source:
ebXML
TMWG
Business
Object
realization
produce
consume
Business
Collaboration
Use Case
e.g. Fowler
realization
BRV
implements
Monitored Commitment
Economic
Resource
Business
Collaboration
Economic
Event
Agreement
Economic
Commitment
Economic
Contract
elaboration
elaboration
BTV
<<pattern>>
Business
Collaboration
Analysis Pattern
implements
Monitored Commitment
is visibility of events
associated with a
commitment
<<pattern>>
Business
Collaboration
Design Pattern
e.g. Gamma
Source: ebXML BCP&MC
Economic
Contract
commitment
to ship
reciprocal
fulfills
goods
commitment
to pay
fulfills
duality
shipment
cash
payment
• E & C agree to a contract where ship on Tuesday, pay on Wednesday
• E ships on Tuesday (commitment to pay in force upon acceptable
receipt, claim may be materialized). However, discount is taken,
so commitment to pay is less than scheduled amount
• C pays discounted amount on Wednesday
Source: ebXML BCP&MC
Economic
Contract
commitment
to ship
reciprocal
fulfills
goods
commitment
to pay
fulfills
duality
shipment
cash
payment
• E & C agree to a contract where pay on Tuesday, ship on Wednesday
• C pays on Tuesday (claim may be materialized)
• E ships on Thursday thus invoking $20 penalty
• C notifies E that commitment to ship not fulfilled in full as unacceptable
timing (materialized claim is reduced to $20)
• E now pays $20
Source: ebXML BCP&MC
Illustration of Perspective: Trading Partner vs. Independent
Enterprise
Independent view of
Inter-enterprise events
Business
Process
Enterprise
Business
Process
Business
Process
Business
Process
Business
Process
Enterprise
Business
Process
Trading Partner view of
Inter-enterprise events
(upstream vendors and
downstream customers)
Business
Process
Blue arrows represent flow of goods, services,
and cash between different companies; green
arrows represent flows within companies
Business
Process
Business
Process
Source: ISO Open-edi
Business Objects and States
(as embedded in COOL or the Commitment
Oriented Orchestration Layer)
• Business Objects are the “nouns” of business deals:
• Examples: Products, Orders, Shipments, etc. (REAs)
• Business States are named states of Business Objects
– which affect both trading partners
– to which both partners must agree
– which mean the whole business deal has changed in an
important way.
• Examples: Order.accepted, Order.rejected, Order.fulfilled,
Order.cancelled
Source: ebXML BCP&MC
BRV collaboration semantics of COOL
are based on business concepts and
practices:
• Accounting “Events” per REA
• Commercial law
• Contract negotiation and
execution
• International Trade
Source: ebXML BCP&MC
Business State Alignment
• Means both trading partners must agree on the state
of each Business Object at the end of each Business
Transaction.
• For example, the Order is not accepted until both
partners agree explicitly that it is accepted.
• The Business Transaction protocol must insure that
both partners transition to the new Business State or neither does.
• Think “electronic handshake”.
Source: ebXML BCP&MC
ebXML Business Process & Information Meta-model
(top-down controlled complexity)
Business Area
Business Operations Map (BOM)
Process Area
Partner Type
Business Process
Business Collaboration
(binary or multiparty)
Agreement
Economic Event
Economic
Resources
Business Requirements View (BRV)
Authorizing
Roles
Business
Documents
Network
Component
Requesting
Business Activity
Business Transaction
Business Transaction View (BTV)
Business Messages
Business Service View (BSV)
Responding
Business Activity
Requesting Service
Transaction
Responding Service
Transaction
Source:
ebXML
TMWG
Business Process: Binary Collaboration
Public
Buyer Party
Seller Party
CatalogReq
Business Transaction
CatalogRsp
QuoteReq
Business Transaction
QuoteRsp
Business Transaction
Order
Business
Collaboration
OrderRsp
Business Transaction
ASN
Business Transaction
Invoice
Business Transaction
Payment
Source:
ebXML
BPSS
Business Transaction
Requesting
Activity
Unit of Work
Responding
Activity
Request Document
ReceiptAcknowledgment
SignedReceipt Signal
NonRepudi
ation
AcceptanceAcknowledgment Signal
NonRepudi
ation
Response Document
Time-Outs
Guards
Success
Failure
Legally Binding
Source:
ebXML
BPSS
Overview: ebXML SpecificationSchema
Multi Party Collaboration
Authorized
Role
Binary Collaboration
Choreography
Transition
Guard
Request Document
Business Transaction
Response Document
Business Transaction Execution
Parameters
Source:
ebXML
BPSS
Runtime
Design Time
ebXML Architecture
Business
Process
Business
Documents
Registries/
Repositories
Collaboration
Protocol
Profile
Business
Service
Interface
CP Agreement
Transport
Core/Industry
Components
Business Libraries, Trading
Partner Directories, etc…
Collaboration
Protocol
Profile
Business
Service
Interface
Message
Business
Services/App’s
Business
Services/App’s
Source:
ebXML
Order
pending
Repository
Business
Process
Catalog
Business
Entity Type
Library
Business
Information
Entities
C
O
N
T
E
X
T
Order
Goods
Order
expectingDelivery
Deliver
Goods
Source: ebXML BCP&MC
Why are leveled and semantically-precise value chain
& supply chain models important ?
(WHY are REA patterns important ?)
•They provide automatically the detailed economic semantics of the
common order-deliver-settlement patterns of e-commerce to the
collaboration management software (as explained above);
• They provide the basis for integrating the descriptive components
of old accounting (expanded to commitments and multiple nonmonetary dimensions) with the prescriptive components of new
accounting; and
•They provide the basis for representing the “economic events” of
an enterprise with no double-entry (A= L + OE classification) spin
to both upstream parties (capital, labor, and raw material suppliers)
and downstream parties (customers) on a continuous reporting
basis (see next slide for architecture).
Accounting
Knowledge
Traditional Accounting System
Old
Accounting
{
Accounts
Receivabl
e
Job
Costing
EDGAR FILES
Inventory
SEC
FSA
Order
Entry
Payroll
Gener
al
Ledger
Filing
Uses
Present
Use Path
Real
World
Systems
Analysis
& Design
Financial Decision
Makers
{
New
Accounting
Value-Added Processing
Object-Object
Connection
Knowledge-Based
Decision
Support System
Uses
Object Enterprise Model
SOURCE: G. Geerts and W.E. McCarthy “An Accounting Object Infrastructure for
Knowledge-Based Enterprise Models” IEEE Intelligent Systems, July/August
1999, p.92.
ebXML
&
XBRL
ebXML   XBRL
XBRL 
External
Report
COMPANY E
Reporting Taxonomy:
•AccRec – xx
Saies -- xx
•COGS – zz
FinGood– zz
Business
Service
Interface
(BSI)
External
Report
COMPANY C
Business
Service
Interface
(BSI)
External
Report
Reporting Taxonomy:
•Purchases – xx
AccPay- xx
AccPay – xx
Cash -- xx
Cash – xx
AccRec -- xx
Company-neutral (but
strictly-typed with REA)
view of a business
collaboration. For
example:
-Order REA contract/commitment (no account)
-Fulfillment REA initiator Economic Event
-Settlement REA responding Economic Event
Source: J. David, G. Geerts & W. McCarthy
Evolutionary Tree –
Enterprise Information Systems
Enterprise
Systems
No Organizing
Rationale
Single Entry
Inwardly Oranized
A = L + OE
Outwardly
Organized
Enterprise
Value Chain
Hybrid
Single
Source
ERP
Transactions
& Obligations
Bookkeeping
MS Money
Quicken
Multidimensional
Accounting
Platinum
Solomon
Peachtree
Quickbooks
Modular
Integration:
ABC, MRP
Independent
Best of
Breed ERP
IntegratorEnabled
ERP
PeopleSoft
SAP
BPCS
Great Plains Dynamics
Trading
Partner
Constellar Hub
Vitria
StandardsEnabled
Supply
Chain
OMG
OAG
Customer
Focused
Siebel
Goldmine
i2
Ariba
ebXML
ISO Open -EDI
Source: J. David, W. McCarthy & B. Sommer