The REA Accounting Model - Intellectual Heritage and Prospects For Progress

4/3/2017 TheREAAccountingModel:IntellectualHeritageandProspectsforProgress
TheREAAccountingModel:IntellectualHeritageandProspectsforProgress

CherylL.Dunn
FloridaStateUniversity

WilliamE.McCarthy
MichiganStateUniversity

Sendpageproofsto:WilliamE.McCarthy
DepartmentofAccounting
N270NorthBusinessComplex
MichiganStateUniversity
EastLansing,MI48824

Acknowledgments:Theauthorswouldliketoacknowledgethehelpfulcommentsofthreeanonymousrefereesandthe
editorontwoearlierversionsofthispaper.HelpfulpointersintotheliteraturewereprovidedbyWilliamSchraderand
StephenZeff.WewouldalsoliketoacknowledgecommentsreceivedattheMichiganStateUniversity1995SummerAIS
Colloquiumandatthe1995WorkshoponSemanticModelingofAccountingPhenomena.Financialsupportwasreceived
fromArthurAndersenLLPandfromtheDepartmentsofAccountingatGrandValleyStateUniversityandMichiganState
University.


ABSTRACT:ResearchersoftenequatedatabaseaccountingmodelsingeneralandtheResourcesEventsAgents(REA)
accountingmodelinparticularwitheventsaccountingasproposedbySorter(1969).Infact,REAaccounting,
databaseaccounting,andeventsaccountingareverydifferent.BecauseREAaccountinghasbecomea
populartopicinAISresearch,itisimportanttoagreeonexactlywhatismeantbycertainideas,bothin
conceptandinhistoricalorigin.ThisarticleclarifiestheintellectualheritageoftheREAaccountingmodeland
highlightsthedifferencesbetweenthetermseventsaccounting,databaseaccounting,semanticallymodeled
accounting,andREAaccounting.ItalsodiscussespotentiallyproductivedirectionsforAISresearch.

Keywords:REAaccounting,eventsaccounting,databaseaccounting,semanticallymodeledaccounting,accounting
models,accountinginformationsystems

Formorethan50years,researchersandpractitionershavenotedtheinabilityofaccountingsystemstofacilitate
nonfinancialdecisions(Goetz1939Firmin1966Fisher1994).Infact,thisproblemhascontributedtowhatisconsidered
tobeastateofcrisisinaccountingsystems(Andros,CherringtonandDenna1992Cushing1989DunnandMcCarthy
1991Elliott1992).Therecurringthemeinthesestudiesistheneedforaccountantstochangetheirroleinorganizations.
Ratherthanprovidingonlytheservicesofproducingfinancialstatementsandpolicingthecontrolpoliciesoffirms,the
accountantmustbecomeabusinesspartnerstrivingtomeetallofthefirm'sinformationneeds.Databaseaccountingin
general(forexample,Colantoni,ManesandWhinston1971GeertsandMcCarthy1992)andtheResourcesEventsAgents
(REA)accountingmodelmorespecifically(McCarthy1982)havebeenproposedasmeansofrecordingandstoring
accountinginformationinsuchawaythattransactiondetailsareavailablefornonaccountingdecisions.Maintenanceand
https://msu.edu/user/mccarth4/DUNN&MC.htm 1/18
useofsuchaccountingsystemsmovesthecorporateaccountanttowardtheroleofafullbusinesspartnerandmanagerof
theeconomicactivitiesofanenterprise.
McCarthy(1981)reviewedthegeneralnatureofworkdoneonmultidimensionalanddisaggregateaccounting
systems.Sincethattime,however,inconsistenciesintheperceivedoriginandnatureofthisworkhavearisen,suchasthe
mistakenbeliefthatREAmodelinginvolvessimplytheuseofdatabasetechnologytoimplementtheideasofSorter(1969)
oneventsaccountingandofIjiri(1975)oncertainaspectsofaccountingmeasurementfundamentals,particularlycausal
doubleentry.AsuseoftheREAaccountingmodelinAISresearchincreases(Schneider1995Leech1995),itisimportant
todispelsuchmisconceptions.ConflictingandoverlappinguseofthetermsEventsAccounting,DatabaseAccounting,and
REAAccountingalsoindicatesaneedforclarificationanddifferentiationofthesemodels.Makingthisdistinctionisone
objectiveofthisarticle.Asecondobjectiveistoidentify,basedontheclarificationofthemodels,potentialresearchareas.
SectionIdiscussestheintellectualheritageoftheaccountingapproaches.SectionIIidentifiesequivalentor
overlappingaspectsoftheapproaches.SectionIIIdelineatestheaspectsofeachapproachthathavebeensubjectto
validationandtheresultsofsuchefforts.SectionIVdiscussesresearchdirections.SectionVoffersconclusions.

I.INTELLECTUALHERITAGE

EventsAccounting
Sorter(1969)coinedtheterm"eventsaccounting"asasolutiontoproblemswiththeconventionalapproachto
accounting(whichhelabeledthe"valuetheory").Heclarifiedhisdefinitionoftheeventsapproachwithtwooperationalrules
(Sorter1969,16):
Abalancesheetshouldbesoconstructedastomaximizethereconstructabilityoftheeventsbeing
aggregated.

Eacheventshouldbedescribedinamannerfacilitatingtheforecastingofthatsameeventinafuturetime
periodgivenexogenouschanges.
WhileSorteradvocatedlessaggregationthanwaspresentinfinancialstatementsthen,examinationofhisrulesandhis
latertextbook(Sorteretal.1990)revealsthathewasnotadvocatingstorageandmaintenanceoftransactionleveldetail.He
definedhiseventsapproachtoaccountingasstressing"thedeterminationofaccountingeventsfromfinancialstatements"
(Sorteretal.1990,107).Hesuggesteditisnecessarytoknowthechangesinthebalancesheetaccountsinorderto
deduceevents.Hiswasareportingmethodratherthanaproposaltoreorienttransactionprocessingsystems.
AfterSorterproposedhistheory,Johnson(1970)definedseveralofitsconceptsmorerigidly.Hehintedattheneed
formultidimensionaltrackingofeventsbydeclaringthatuserforecastingcapabilities"wouldbeenhancedifthe[event]
reportsweretoincludeobservationsotherthanthemonetarycharacteristic"(p.649).
SevenyearspriortoSorter'sarticle,Schrader(1962)touchedonmanyofthesameissuesaddressedbySorterand
Johnson.Schrader'sarticleisnotrecognizedbymanyaseventsaccounting,perhapsbecausehedidnotemphasizethe
termevents.However,thecontentfocusesontherecordingandstoringofthedetailsofevents.Heclaimedtobeapplying
Goetz's(1939)notionofaBasicHistoricRecordtotheaccountingdomain,emphasizingtheneedforaccountantstofocus
ontheobjectsgivenandreceivedandtorecordthewho,what,when,andwhereforeachrelevantevent.Relevantevents
weredefinedasexchanges.Inatextbook(1981)coauthoredwithMalcolmandWillingham,Schraderemphasizedthe
differencebetweenobserveddatarecordedinanexchangeandotheranalysisormanipulationofthedata.Inasection
entitled"BasicHistoricRecord"hesuggestedthatitmaybedesirabletofurnishdifferentaccountingstatementstovarious
users,dependingontheirdesires.However,theensuingdiscussionindicatesthatwhatSchradermeantbyabasic
historicalrecordwasnotadatabankofprimitiverawdata(asGoetzintended),butsimplyaseparationofaccrual
accountingentriesfromentriesrepresentingtransactions.

DatabaseAccounting
Theideaofusingdatabasesorsimilarinnovationsinaccountingandfinancialreportingisevenolderthanevents
accountingconcepts.Goetz(1939,1949)criticizedaccountingbecauseofitsinabilitytosupportmanagementfunctions.He
arguedthataccountantsarenotqualifiedtoselect,classify,ormeasurebusinessphenomenaunlesstheyfullyunderstand
thenatureoftheissuestobedecided.Atthesametime,userscannotevaluateinformationunlesstheyfullyunderstandthe
methodsusedtoproducetheinformation.Inaddition,Goetzarguedthatmultiplevaluesshouldberecordedsince"different
answersservedifferentpurposesorfitdifferentsituations"(1939,152).
Asasolution,GoetzproposedthecreationofaBasicHistoricRecordorBasicPecuniaryRecordthatwouldbean
objectiverecordofoccurrences(transactions)indicatingwhatwasobtainedandsurrenderedbythecompanyincludingthe
dateofthetransaction.Adjustmentsnecessaryforlegalorforfinancialaccountingpurposesmaybemadeassupplements
totherecord,buttheywouldnotpermanentlyaltertherecorditself.Themainrequirementoftheproposedsystemwas
flexibility.Goetz'sgoalwastopreservetheoriginaldatainitsmostprimitiveformsoitcouldbeorganizedinthemost
appropriateformforeachdecisionmaker.
WhileGoetzwasadvocatingthemaintenanceofaBasicHistoricorPecuniaryRecordintheAmericanliterature,
SchmalenbachwasmakingsimilarargumentsinGermany(Schweitzer1992).BackHock(1995)discussed
Schmalenbach'sideasandnotedthathecoinedthetermGrundrechnungforthecollectionofdatanecessaryinsuchan
accountingsystem.AccordingtoBackHock,theGrundrechnungsuppliesdataundistortedlysoastosatisfyagreatvariety
ofpotentialinformationrequirements.Itmaynotcontainresultsfromarbitrarydistributionoperationsandvaluationsinstead
quantitiesandtheirmonetaryaspectmustbestoredexplicitly.Itsdesignmustbeflexibleenoughtoaccommodatenew
attributeswhenrequirementschangeorgrow.BackHock(1995)identifiedthebasictypesofdataunitsinthe
Grundrechnungas:
1.Objectsofdecisions,e.g.,eventsandstates,
2.Factorsthatinfluencetheseobjects(e.g.,decisionparametersoraspectstobe
takenasgiven,orfunctionalrelationshipsbetweentheseobjects),and
3.Domainvaluesofobjectsandinfluencefactors.
Bystoringsuchdataunitsseparately,theGrundrechnungwouldprobablybeabletosatisfyavarietyofpotentialinformation
requirements.
Colantoni,ManesandWhinston(1971)werethefirstaccountingresearcherstoexplicitlyconnectdatabase
technologywiththeproblemofbuildingmorepowerfuldisaggregateandmultidimensionalaccountingsystems,although
otherslikeFirmin(1966)andEaves(1966)hadbroachedtheissueinmoregeneralterms.Colantonietal.describeda
techniqueforcodingeacheventwithbothmonetaryandnonmonetarycharacteristicsandextendedthisschemebyusinga
treetype(hierarchical)datastructuretoparallelthenormalchartofaccountsforcodedeventtypes.Theyalsointroduceda
datamanagementlanguage.Inouropinion,however,theymisinterpretedSorter(1969)whentheyproposedhisideasasa
callforcomputerizeddisaggregatedatabases.Asweexplainlater,ourinterpretationofSorters1969article(especially
whenitisreadinthelightofhislatereventsideas)isquitedifferent.Weseenostrongproposalfornewerkindsof
transactionprocessingsystems,onlyasuggestionfordifferenttypesoffinancialstatementdisclosure.
Twomorearticlesproposinghierarchicaldatabaseaccountingmodels(LiebermanandWhinston1975Haseman
andWhinston1976)incorporatedmanyoftheearly1970sadvancesindatabasetechnology.LiebermanandWhinston
proposedalogicalframeworkforaneventsaccountinginformationsystemanddescribedapossibleimplementationof
suchasystem.HasemanandWhinstondescribedtheprocessesinvolvedinselforganizingdatabasesinvolvingthe
transformation(baseduponastreamofuserinquiries)ofunstructureddatafilesintologicaldatabanks.
EverestandWeber(1977)appliedsomeconceptsofCodd'srelationaldatabasemodel(1970,1972a,1972b)to
accounting.Toderiverelationalmodelsforbothmanagerialandfinancialaccounting,EverestandWebertookconventional
accountingframeworksandnormalizedthemusingCodd'sdecompositionprocess(1972a).Theythenillustratedtheuseof
relationalalgebraoperationstoderiveinformationfromthenormalizeddatabase.Theyobservedthatapplicationofthe
relationaldatabasemodeltoaccountingframeworkswasaprocedurefraughtwithmajorproblems.Forexample,they
notedthatthedualityofdoubleentry(i.e.,thedoubleentryaccountingequation)seemsatoddswithefficientcomputer
processing.Also,thenormalizationprocessembeddednamingandclassificationartifactsinthedatabaseschemawhenit
wasappliedtoaconventionalchartofaccountsframework.Theynotedthatmuchaccountingtheoryconcernsefficient
classificationschemesornamingconventions,whereasdatabasemanagementtheoryismoreconcernedwiththeobjects
tobeclassified.EverestandWebercalledforfurtherresearchtomakeaccountingsystemsfitadvanceddatastructures
better.
McCarthy(1979,1980a)developedadatabaseaccountingsystemtoaccomplishthebetterfitofaccounting
systemstoadvanceddatastructures.HedidsobyapplyingChens(1976)entityrelationship(ER)designprocesstothe
accountingdomain.Thisresultedinadatabaseschemawithahighlevelofsemanticexpressivenessandwithout
embeddedproceduralaspectsofconventionalaccounting.

REAAccounting
McCarthy(1982)extendedhisERapproach,exploringtheissueofdatabasedesigninalargerorganizational
context.Heemphasizedthatachangeinperspectiveisneededifaccountingistobecomeaconstituentpartofan
enterprisedatabasesystemratherthanremaininganindependentandnonintegratedinformationsystem.Heexplainedthat
theviewmodelingandviewintegrationphasesofdatabasedesignrequirethataccountingphenomenabecharacterizedin
termscompatiblewithnonaccountingdecisionuse.HeproposedtheREAaccountingmodelassuchacharacterization.

Figure1abouthere

Figure1illustratestheentitiesandrelationshipsofanREAmodel.Inadditiontotheresource,event,andagent
entities,therearefourdifferenttypesofrelationshipsintheREAmodel.Stockflow(includinginflowandoutflow)
relationshipsdenoteeventswhichincreaseordecreaseeconomicresources.Dualityrelationshipsassociatethedualparts
ofasingleeconomicexchange,i.e.,whatisgivenupislinkedtowhatistakenin.Anexamplewouldbeasalethatislinked
toaresultingcashreceipt.Thecontrolrelationshipisaternaryconnectionbetweenaninsideagent,anoutsideagent,and
aneconomicevent.Forexample,apurchasetypicallyinvolvesabuyer(insideagent)andavendor(outsideagent).Often,
however,thisternaryrelationshipisdividedintotwobinaryonesthisisacommonimplementationcompromisethatmakes
themodeleasiertounderstandandimplement.ResponsibilityrelationshipswerealsodefinedbyMcCarthy(1982)for
REA,althoughtheyarenotshowninFigure1.Aresponsibilityrelationshipindicatesthathigherlevelunitscontrolandare
accountablefortheactivitiesofsubordinates.Economicunitsareasubsetofeconomicagents.Theroledeclarationsfor
eachofthefourtypesofrelationshipsareportrayedinMcCarthy(1982,564).
McCarthyproposedthattheREAframeworkbeusedasastartingpointforenterprisewidedatabasedesign.He
suggestedmodificationsthatmaybeuseful,dependingonspecificcorporateinformationneeds.Onesuchmodificationis
theuseofgeneralizationasadvancedbySmithandSmith(1977).Generalizationrelatesdifferentsubtypesorsubsetsof
entitiestoageneralizedtypeorsuperset.McCarthyusedtheexamplethattheentitiesrawmaterial,workinprocess,and
finishedgoodsgeneralizetotheentityinventory.Themodelingofgeneralizationhierarchiesallowedmuchcloser
correspondenceofsystemprimitiveswiththerealworldphenomenatheyrepresented.
McCarthy(1982)alsoenumeratedmanyoftheproceduralenhancementsthatwouldbeneededinaworkingREA
systemtomaterializeaccountingconclusions.ThissametopicwastreatedinmoredetailinMcCarthy(1984).

InfluencesofMattessichandIjiriontheREAmodel
WhenMcCarthyfirstformulatedtheREAmodel,hedidsobyabstractingfromcurrentpracticeinthestructureof
accountingsystemswiththedatamodelingtechniquesofaggregationandgeneralization(Chen1976SmithandSmith
1977).Theconceptsheproducedasaresult,however,boreclearresemblancetotheworksoftheoristssuchas
MattessichandIjiri,andMcCarthyusedelementsoftheirworktodescribeREAcomponents.Itisimportanttoremember
thatthoseconceptsarenotidenticalbutonlysimilar.AlthoughtheprecisedefinitionsofREAconstructsarethosein
McCarthy(1982),theideasofIjiriandMattessichstronglyinfluencedthechoiceofterms.
Mattessich(1964)wasoneofthebestsourcesforabstractdescriptionsofaccountingphenomenaavailableinthe
1970s.Hisaxiomatizationofaccountinggavesubstancetothenotionsofeconomicagents,economicobjects,andduality.
NoneoftheREAprimitivesmatchthe1964definitionsexactly,butoveralltheyarecloseinspirit.Themostnotable
differencewasinMattessich'sexplanationofdualitywhichdivergessharplywithREAdualitybecauseitconcentrateson
classificationaldoubleentry,acircumstancenotedlaterbyIjiri(1975).
Ijiri's(1967,1975)accountingmeasurementworkhadaclearinfluenceontheREAaccountingtermsusedby
McCarthyandlaterbyGeertsandMcCarthy(1994).Hisdifferentiationbetweencausalandclassificationaldoubleentrylaid
afoundationfortheREAnotionofduality,andhiscausalnetworkspresagedtheconceptofconnectingREAprocessesinto
anenterprisevaluechainlikethatpopularizedbyPorter(1985).Itshouldbeemphasized,however,thatalthoughIjiri'scausal
doubleentryissimilartoREA'sduality,theconceptsareclearlynotidentical,adisparityaccentuatedbySeddon(1991,5
11).Ijiristressedequalityofvaluesforresourcesincrementedanddecrementedinanexchangewhilethereisaclear
presumptioninREAaccountingsystemsthatincrementsareexpectedtoexceeddecrementsinvalue(Geertsand
McCarthy1994)innormalexchanges.Additionally,Ijiri(unlikeafullREAmodel)didnotadvocatefulltraceabilityas
evidencedbyhisallowanceofproceduressuchasperiodicmatching.Ijiri(1975)introducedtheconceptofintentionally
degenerateexchangessuchasspendingmoneyongeneralandadministrativeservices.REAdoesnotmodelsuch
expendituresasunrequiteddecrements,butasdecrementsthatwillbetraceabletofutureincrements.
Inlateryears,Ijiri'sworkontripleentrybookkeepingandmomentumaccountingtookhimfurtherandfurtherfromthe
worldofREAmodelingashemovedtowardapreoccupationwithclassificationalsystems.However,Ijiri(1967,1975)
undeniablyinfluencedthedevelopmentofREAaccountingconceptsinaverysubstantialway.Inmanyways,thedifferences
betweenIjiri'sfullyexplicatedideasandREAprimitivesareonesoffocusandorientation.Ijiri'searlyworkemphasized
accountabilitydrivenmeasurementandvaluationbasedonhistoricalcostconcepts,whileMcCarthywasmostconcerned
withsemanticrepresentationofenterpriseeconomicphenomenaleadingtoactualinformationsystemimplementation.

SectionSummary
ThissectionhaspresentedtheintellectualheritageofREAsystems.ThecitationhistoryofREAaccountingincludes
eventsaccountingworkssuchasSorter(1969)anddatabaseaccountingworkssuchasColantonietal.(1971).Worksof
theoristssuchasMattessichandIjiri,whichdonotfitintoeitherofthesecategories,helpedgiveMcCarthyatheoretical
foundationforhisREAprimitives.However,thedifferencesbetweentheREAmodelanditsintellectualpredecessorsare
significant.ThenextsectionproposesameansofdifferentiatingamongREAandotheraccountingmodels.Thesecriteria
arethenappliedtothepapersdiscussedinthissectiontoprovideclarificationastotheextenttowhichequivalenceand
overlapcanbeidentifiedbetweeneventsaccounting,databaseaccounting,andREAaccounting.

II.DIFFERENTIATINGACCOUNTINGMODELS

CriteriaforDifferentiation
ThreecorefeaturesoftheREAaccountingframeworkitsdatabaseorientation,itssemanticorientation,andits
structuringorientationcanbeusedtocompareandcontrastevents,database,andREAaccountingmodels.Eachofthese
orientationsisexplainedinthissection.Subsequently,eachofthepapersdiscussedinsectionIisanalyzedastowhat
extentthesefeaturesareincluded.

DatabaseOrientation
Adatabaseorientationasdefinedhererequiresthreeconditions:
1.Datamustbestoredattheirmostprimitivelevels(atleastforsomeperiod),
2.Datamustbestoredsuchthatallauthorizeddecisionmakershaveaccesstoit,and
3.Datamustbestoredsuchthatitmayberetrievedinvariousformatsasneeded
fordifferentpurposes.
Theseconditionsdonotrequiretheuseofdatabasetechnologyobjectoriented,artificialintelligence,orothertechnologies
thatallowstorageandmaintenanceofprimitivedetailaccommodatethisorientation.Thisalsoallowsforsystemsbuiltusing
databasetechnologythatdonothaveadatabaseorientation.Anexampleisasystembuiltwithmicrocomputerdatabase
managementsoftwarethatusestablestorepresentjournalsandledgers,butdoesnotkeepinformationaboutmultipleline
itemsforsalesorpurchases(orthatkeepssuchinformationonlyuntiltheaccountingperiodisclosed).

SemanticOrientation
Integratedsemanticsisafundamentalideaofmoderndatabasemanagement,reflectedinAbrials(1974,3)
definition,"adatabaseisamodelofanevolvingphysicalreality."Restatedintermsofdesignmethodology,thismeansthat
allpotentialusersofadatabasepooltheirnotionsofimportantinformationconceptsandusethatintegratedsetofideasto
buildoneconceptualdatamodelthatserveseverybody.Theobjectsinthisconceptualmodelarerequiredtocorrespond
closelytorealworldphenomena,hencetheaccentuateduseofthetermsemantictodescribethisactivity.Inanaccounting
domain,integratedsemanticsmeansthataccountingmodelsshoulddepicttheeconomicexchangesorprocessesthat
producethefirm'saccountingdata(suchastherevenueprocessshowninfigure2).Componentsofthemodelsshould
reflectrealworldphenomena,asituationthatprecludestheuseofbasicdoubleentryartifacts(e.g.,debits,credits,
accounts)asdeclarativeprimitives.Semanticallymodeledaccountingsystemsallowrepresentationsofeconomic
exchangephenomenatobeintegratedwellwithdescriptionsofnonaccountingphenomena(asdisplayedbysomeofthe
dottedlinesinfigure2).Bothofthesetypesofdatacanbeaccessedandusedextensivelybynonaccountingdecision
makers,somethingnotfacilitatedbytraditionalaccountingsystems.

Figure2abouthere

StructuringOrientation
Astructuringorientationmandatestherepeateduseofanoccurrencetemplateasafoundationoraccountability
infrastructurefortheintegratedbusinessinformationsystem.TherearetwocorestructuringideaswithintheREA
accountingmodel.
Firstistheuseofatemplatethatrecordsandstoresdataassociatedwithsetsofeconomicevents,asillustratedin
bothhalvesoffigure1.Foreacheconomicevent,dataarerecordedandstoredpertainingtoresourcesandagents
connectedtotheevent.Forexample,Salesisasetofeventsaboutwhichbusinessesrecordandstoredata.Alongwith
capturingdataabouteachsaleevent(e.g.,invoicenumber,date,amount,etc.),REAstructuringrequiresthatdatabe
capturedabouttheassociatedresources(e.g.,inventory,deliverytruck,labor)andagents(e.g.,salesperson,customer)
involved.Theresources,eventsandagentsarereferredtoasentitiesorthingsofconcerntoorganizationaldecision
makers.TheREAmodelalsorequiresthatdataaboutrelationshipsbetweenoramongtheentitiesbemaintained.
Therefore,thedatamustbestoredinsuchawaythatthelinks(1)betweenaneventanditsresourcesinvolvinginflowsand
outflows(stockflowrelationships)and(2)amonganeventanditsagentsinvolvingparticipation(controlrelationships)are
preserved.
Thesecondstructuringideaisthattherearetwobasictypesofeconomiceventsresourceoutflows(give)and
resourceinflows(take)andthatthesetypesarenormallycoupledthroughdualityrelationships.Foratransactioncycle,this
meansthattwomirrorimageREAtemplatesareconnectedinagivetakepairingthatmodelsanexchange.Thisisshown
aboveandbelowthedottedlineinfigure1.
Asimplifiedexampleofthetwostructuringideasbeingusedtogetherisportrayedinfigure2wheresaleevent
templatesarerelatedtocashreceipteventtemplatesandwheresometypesofresourcesaregiveninconsiderationfor
others(i.e.,theremustnormallybeatleastonecashreceiptassociatedwithasale).Atanytime,theremaybeexchange
imbalances(e.g.,asaleforwhichcashhasnotyetbeenreceived)thatresultinclaimssuchasaccountsreceivable
(McCarthy1982,568).
ThestructuringorientationofREAaccountingenablesthemaintenanceofacentralizeddatabank,structuredsuch
thattheresultantaccountingsystemcanserveasaframeworkfortheintegratedbusinessinformationsystem.FullREA
modelingasdescribedbyGeertsandMcCarthy(1994)considersthefirmasasetofexchangesoractivitieswheresome
resourceisgivenup(thedecrement)inreturnforaresourcetaken(theincrement)ineachprocess(Geerts1993).Atthe
highestlevelofabstraction,theentireenterpriseisconsideredasoneprocesswithaninputofcash(initialfinancing)andan
outputofcash(debtorequityrepaymentplusprofit).Theabstractorganizationofsuchprocessesdownwardinto
successivelyfinerlevelsofdatadetailandupwardintoanenterprisevaluechainisathemeexploredextensivelybyGeerts
andMcCarthy(1994).

ApplicationoftheDifferentiationCriteria

EventsAccounting
AlthoughtheeventsaccountingpapersdiscussedinsectionIadvocatelessaggregationthanhadpreviouslybeen
presentinaccountingsystems,theydonothaveadatabase,semantic,orstructuringorientation.Providinguserswith
financialstatementsthatarepreparedinsufficientdetailthattheycandeduceunderlyingevents(byemphasizingcashflows
andremovingaccruals)isaverydifferentconceptthanprovidinguserswithadatabaseofinformationfromwhichtheycan
extracteventdatainvariouslevelsoffocusandaggregation.

Figure3abouthere

Figure3illustratesspecificallythemaindifferencebetweeneventsaccountingperSchrader(1962),Sorter(1969)
andJohnson(1970)andREAaccountingperMcCarthy(1982).Asillustratedinfigures2and3,semanticdatamodelseasily
accommodatethenotionofgeneralizingfromentitysetsandtypifyingclassattributesofthoseconcepts.Figure3
generalizestheentitysettypesofsale,cashreceipt,cashdisbursement,andpurchasetothesetofalleconomicevents.
Doingsocausesanexpansionintheaggregationplane(McCarthy1982)asseenonthemiddleleftoffigure3.Inthenotion
ofeventtype,thereistheclearintentofSorterinhiseventsaccounting.Hewasnotproposinganaccountingmodelthat
wouldmaintaintransactionleveldetail(asdesignatedintheindividualeventsoffigure3),butonlythedisaggregationof
certainlinesonfinancialstatements.Thetable[1]representingtherelationshipbetweeneventtypeandtimeperiodinfigure
3(thePeriodEventCategoriestable)comesclosetothemeaningofSorter'seventsaccounting.Hecalledforlessaccrual
andfewercombinationjudgments,notforadifferentkindofaccountingdatamodel.
DatabaseAccounting
ThedatabaseaccountingworkdescribedinsectionIvariesastotheextentitincludesdatabase,semantic,and
structuringorientations.Ananalysisofeachfollows.
TheGoetz(1939,1949)ideaofaBasicHistoricRecordwasstartlinglysimilartothenotionofamoderncomputer
database,especiallyasemanticallybuiltdatabasethatmodelsreality.Goetz'sideasareconsistentwiththeuseofa
templatetocapturedatainprimitiveform,andhealsohintedatthenotionofduality,althoughhedidnotdiscussit
specifically.Thus,databaseandsemanticorientationsareclearlyevidentinGoetz'swork,andastructuringorientationis
partlyrepresented.Schmalenbach's(1948)GrundrechnungappearstobeequivalenttoGoetz'sBasicPecuniaryRecord
andislikewiseconsistentwiththedatabaseandsemanticorientations.
TheworkofColantonietal.(1971)isimportant,becauseitwasthefirsttorecognizethattheeventsconcept(atthe
instancelevel)couldonlyberealizedbyathoroughintegrationofaccountingconceptswithconceptsofdatabase
management[2].Theirworkisalsoveryimportant,becausetheywereamongthefirsttoproposeacomputerized
accountingsystemthatwasnotbasedprimarilyondoubleentryaccounting.Theirlackofimmediateclassificationofevents
intodebitandcredittermsandtheabilityoftheirproposedsystemtocreatemultipleviewsofdataareconsistentwitha
databaseorientation,andatleastpartlyconsistentwithasemanticorientation(althoughtheystillclingtotheaccountartifact
intheirdeclarations).Thereisnoclearstructuringorientationintheirsystem.
LiebermanandWhinston(1975)andHasemanandWhinston(1976)focusoneventsattheinstancelevel,thus
demonstratingsomelevelofdatabaseorientation.However,theexampleimplementationstheydiscussuselistprocessing
that(asEverestandWeber(1977)pointout)negatesthedatabaseorientationbyeliminatingdataindependence.Thereis
alsonostrongevidenceofasemanticorientationtheyusedebits,credits,andaccounts.Theredoesnotappeartobea
structuringorientation.
EverestandWeber's(1977)workdemonstratesadatabaseorientation,buttheirattempttosupportclassificational
doubleentryartifactsmaketheirmodelinconsistentwithasemanticorientation.AsmentionedinsectionI,theyrecognized
thattheproblemstheyencounteredprobablyresultedfromthislackofsemanticorientation,andtheysuggestedthatfuture
databasesystemsnotmodelaccountingartifacts.Nostructuringorientationisevidentintheirwork.
McCarthy(1979,1980a)includeddatabaseandsemanticorientations,advocatingshareduseofelementarydata
withoutaccountingartifactsembeddedintoasystem.ThefullstructuringoftheREAmodelisnotspecifiedinthiswork,but
manyofitselements(suchasstockflowanddualityrelationships)arediscussedanddemonstrated.[3]

REAAccountingSystems
McCarthy(1982)extendedhisearlierworkbykeepingitsdatabaseorientation,byexpandingitssemantic
orientation[4]toincludinggeneralizationhierarchies,andbyaddingafullstructuringorientationasdescribedearlierinthis
section.Theresultofadoptingallthreeoftheseorientationsisasemantictheoryofhowaninformationsystemthattracks
economicphenomenashouldbestructuredinashareduseenvironmentwithoutregardforeverchangingtechnology
platforms.

Figure4abouthere

SectionSummary
Figure4summarizeshowallthedifferentworksdiscussedinthissectionfittogether.Theoutercirclerepresentsthose
accountingmodelsthatfocusoneventtypesasprimitivesandadvocatelessaggregationthanthetraditionaldoubleentry
bookkeepingmodelprovides,yethavenodatabase,semantic,orstructuringorientation.WelabelthiscategoryEvents
Accountingbecausetheeventsarticlesallfitthiscriterion.Thenextcircletowardthecenterrepresentsthoseaccounting
modelsthathaveadatabaseorientationbutdonotexhibitasemanticorstructuringorientation.Wehavelabeledthis
categoryDatabaseAccountingbecausemostofthearticlesinthatheadingfitthesecriteriawithexceptionsofGoetz(1939,
1949),Schmalenbach(1948),andMcCarthy(1979,1980a).Theseexceptionsconstituteanewcategory,thethirdcircle
towardthecenterofthediagram.Thiscirclerepresentsaccountingmodelsthathaveadatabaseandasemantic
orientation,butdonotspecifyastructuringorientation.WelabelthiscategorySemanticallyModeledAccounting.Thecenter
circlerepresentsaccountingmodelsthatencompassallthreeorientations.WelabelthisREAAccountingbecauseREAis
theonlyaccountingmodelthatcontainsallthreeorientations.Table1portraystheworksinthiscategorization,anditalso
summarizes[5]someofeachworksmajorideas.

Table1abouthere

Obviously,thisdelineationcannotexhaustivelyandpreciselytypeallresearcheffortsaimedatbuildingbetteraccounting
systems,butitcanbeusedtogivesomestructuretoafieldwhereambiguityoftermsiswidelypresent.Aswithmost
categorizations,therearegrayareas.Forexample,Colantonietal.(1971)haveatleastapartialsemanticorientation.Thus
theyprobablybelongontheborderbetweenDatabaseAccountingandSemanticallyModeledAccounting.Also,thebenefits
ofthethreedifferentorientationsareonlyhypothesizedtheyhavenotbeendirectlysubjectedtoempiricaltests.Thenext
sectionthereforeexaminestowhatextenttheaccountingmodelspresentedinthiscategorizationhavebeensubjectto
validation,andwhattheresultsofthosevalidationshavebeen.

III.EXISTINGVALIDATIONSOFACCOUNTINGMODELS
Arepresentationmodelsvaluecanbeassessedinvariousways.Oneisbyseeingifotherresearchershavefound
themodelsconceptsusefulintheirownconceptualresearchandiftheyhaveusedvariationsofthebasicthemesand
ideasintheirownmodelbuildingefforts.Assessmentalsooccurswiththedevelopmentofaproofofconceptthebuilding
ofaworkingimplementationofthemodelwhichisoftendoneincomputerscience(NewellandSimon1976McCarthyet
al.1992).Mostconvincinglyinaccountingresearch,amodelmaybevalidatedthroughempiricalexamination.Thissection
reviewstheextenttowhichevents,database,semanticallymodeled,andREAaccountingmodelshavebeenrefined,
implemented,orvalidatedinbothresearchandinpractice.

EventsAccounting
InsummarizingSorter,Johnson,andSchrader'swork,itisimportanttoemphasizethattheseauthorsconcentrated
primarilyontheexternalreportingaspectsofeventsaccounting.Inotherwords,theydidnotattempttodevelop
specificationsfordisaggregateandmultidimensionaltransactionprocessingsystemsbutchoseinsteadtoexpoundonthe
disclosuremethods(andtheeffectsofsuchmethods)thatcouldberealizedwithaneventsapproach.Theseworkswere
veryimportantinthattheysparkedseveralmorearticlesthatusedtheirthemesandproposedimplementationoftheevents
theorywithvaryingformsofcomputersciencetechniques.However,asdiscussedinsectionII,theproposed
implementationsactuallyaddedadatabaseorientationthatwasclearlynotpresentintheoriginaleventsaccounting
theory.
Revsine(1970)didnotconductanempiricaltestofSortersideas,butheidentifiedtheneedtotestthepracticability
ofeventsaccountingfromauserstandpoint.Heagreedwiththepotentialbenefitsofeventssystems.However,he
cautionedthattheuserprocessingconstraintoffinitechannelcapacitywouldcauseeventssystemstoresultinuser
informationoverload,anassertionthathadclearempiricalimplications.BenbasatandDexter(1979)testedtheevents
hypothesisatanindividualuserlevel(looselystated,usersarebetteroffwithdisaggregatedata)bycomparingdecision
performancesinanoperationalcontrolcontext.Thepaperbasedimplementationtheytestedwasoneofaneventtype
nature,consistentwiththeconceptsadvancedbySorterithadnodatabaseorientation.Theyfoundnosignificantlybetter
(profit)performanceattributabletodisaggregatedinformationandadditionallyfoundthatthedisaggregatedatausertook
moretimetomakedecisions.Thetaskusersperformedwashighlystructured,sodesignerswouldbelikelytoknowusers
informationneedsandwouldaggregateaccordingly.BenbasatandDexterrecommendedthateventssystemsbetested
usingdifferent(unstructured)tasksaswell.

DatabaseAccounting
Whileallfourarticlesinthissectiondescribedproposedimplementationsoftheeventsaccountingmodel(as
augmentedwithadatabaseorientation)noneofthefourdescribedanactualworkingimplementation.[6]Thisisprobably
becauseoftheproblemsidentifiedbyEverestandWeber(1977)asinherentintryingtoimplementaccountingartifactsin
databaseformat.Parrelloetal.(1985)attackedthisimplementationofaccountsproblemwithamoreabstractapproach.
However,theirmodelsbecameoverwhelminglycomplexandlessgeneralizableveryquickly,andtherewasnofurther
implementationworkdonewiththem.Additionally,therewasnoempiricaltestinginvolvingthesedatabaseaccounting
systems.

SemanticallyModeledAccounting
BecausetheworksofGoetzandSchmalenbachappearedbeforetechnologywasavailableonwhichtoimplement
theirproposedaccountingsystems,therearenodirectworkingimplementationsoftheirideas.However,theseedsplanted
bySchmalenbachclearlyhadinfluenceinalatercomputerorientedage.SomeGrundrechnungimplementationsare
describedbyBackHock(1995).
McCarthy(1978,1980b)usedarelationaldatabasemodeltoimplementhisERsystemforasmallretailenterprise.
LaterimplementationsreflecttheadvancesofREAstructuringoversimplesemanticrepresentation,andtheyarethus
discussedintheREAaccountingsubsectionbelow.Reuber(1990)proposedasemanticrepresentationalschemefor
manufacturingthataccountedforREAmodelingofactivities,butwhichalsoaddedalayerofnonstructuredsemanticsfor
costmanagement.

REAAccounting
GalandMcCarthy(1983,1986)definedacompromisedretailREAimplementation,firstwithaCODASYLdatabase
managementsystemandthenwithaQueryByExample(QBE)databasesystem.DennaandMcCarthy(1987)didthe
sameforamanufacturingenterprisewithanSQLsystem,asdidArmitage(1985)withQBE.KandelinandLin(1992)
followedtheseimplementationswithobjectorientedworkintheACTORlanguage.ResearchprototypessuchasREACH
(McCarthyandRockwell1989)andCREASY(GeertsandMcCarthy1992)combinedtheREAmodelwithartificial
intelligenceandobjectorientedprogramming,implementingtheirsystemsusingGoldworksandPrologrespectively.Finally,
constructsoftheREAmodelhavebeenusedinproductionaccountingsystemimplementationssuchasthePrice
WaterhouseGENEVADataArchitecturesandtheIBMJapanFinancialDataWarehouseProject(Cherringtonetal.1993).
Weber(1986)isanattempttoempiricallyassessthevalidityoftheREAmodel.Weberapproachedthequestionby
observingwhatwasbeingdoneinpractice,notingthatrealworldaccountingimplementationsprovidearichsourceofdata
againstwhichtotestaccountingmodelsproposedbyresearchers.WeberfoundthatthemajorelementsoftheREAmodel
areincorporatedintosoftwareattheinfologicalorhighsemanticlevel.Thus,themodelisatleastpartiallyvalidated.Atthe
datalogicalorlowsemanticlevel,thesoftwarepackagesdifferedfromoneanotherinareasthatarenotspecificallydefined
byREA.HesuggestedthattheREAmodelberefinedtolowerlevelsofabstraction,evenifthatmeansmakingitdomain
specific.OnerecommendationwastobuildcontractsandcommitmentsintotheREAmodel,twotypesoftransactionsthat
McCarthy(1982)specificallymentionedaspossibleextensions.McCarthy(1982)claimedthatexistingaccounting
conventionallowslessthanfullspecificationofschemaelements,andhedemonstratedthatproceduralimplementations
andmodificationscouldbemadetothegeneralizedframeworktomodelsuchinstances.Differentsituationsmaycallfor
differentuseofproceduralrepresentationsordeclarativemodifications.Theseimplementationcharacteristicsperhaps
accountedforsomeofthelowerlevelvarianceinthesoftwarestudiedbyWeber.

SectionSummary
InthissectionwereviewedthevariouscategoriesofaccountingmodelsidentifiedinsectionII,assessingtheextent
towhichworkingsystemsbasedonthemodelshavebeenimplementedandtheextenttowhichaspectsofthemodels
havebeensubjecttoempiricaltests.ThisanalysisrevealedthattheREAaccountingmodelhasbeenthemostwidely
implemented,refined,andempiricallytestedofthefourmodelcategories.Perhapsmorestrikingisthefactthatveryfewof
thestudiesdiscussedinthissectionwereempiricalvalidations.

IV.PROSPECTSFORPROGRESS
Inthissection,wediscussMarchandSmiths(forthcoming)frameworkforinformationtechnology(IT)researchto
helpidentifypotentiallyproductiveextensionsandvalidationsofREAaccounting.

Figure5abouthere

MarchandSmithFrameworkforInformationTechnologyResearch
Asportrayedinfigure5,MarchandSmith(forthcoming)proposeatwodimensionalframeworkforplanningand
evaluatingITresearch.Thecomponentsofeachdimensionarebelow.
1.Thehorizontaldimensionoftheframeworkdistinguishesbetweendesignscienceandnaturalscience.March
andSmithnotethatnaturalsciencetypicallyconsistsoftwostagestheorizeandjustifyandtheyalso
proposethatdesignscienceconsistsoftwostagesbuildandevaluatewhichactuallyparallelthetwo
stagesofnaturalscience.Buildisdefinedastheconstructionofanartifact,provingfeasibility(i.e.,thatitcan
beconstructed).Evaluateisdefinedasthedevelopmentofspecificmetricsforassessingtheperformance
ofanartifactandthenmeasuringtheartifactaccordingtothatcriteria.TheorizeinITresearchinvolves
explainingwhyandhowanartifactworks(ordoesn'twork),whilejustifyperformsempiricaland/ortheoretical
researchtotesttheproposedtheories.
2.TheverticaldimensionoftheITresearchframeworkconsistsofthebroadcategoriesofoutputsproducedby
designresearch:constructs,models,methods,andinstantiations.Theexactdelineationofthesecategories
issomewhatimprecise,butthefourinconcertcertainlycovermostdesignscienceendeavors.
MarchandSmith(forthcoming)saynaturalscienceaimstounderstandandexplainphenomena,whereasdesign
scienceaimstodevelopwaystoachievehumangoals.TheyfurtherarguethatITresearchshouldbeconcernedbothwith
utility,asadesignscience,andwiththeory,asanaturalscience.IndiscussingtheevaluationofITresearch,Marchand
Smitharguethatbuildingthefirst(neverdonebeforewithinthediscipline)ofvirtuallyanykindofconstruct,model,method,
orinstantiationhasresearchcontributionprovidedtheartifacthasutilityforanimportanttask.Buildingsubsequent
constructs,models,methods,andinstantiationsaddressingthesametaskmustdemonstratesignificantimprovementin
ordertoprovideresearchcontribution.Thus,perMarchandSmith,evaluationisthekeyactivityforassessingsuch
research.

TheBuildandEvaluateCategories
MostoftheworkdiscussedinthispaperfitsintotheBuildcategoryofMarchandSmithsframework,andmore
researchcanbedoneinthiscategory.However,asMarchandSmithemphasize,futureBuildworkmustmeetcertain
criteriaifitistobeconsidereduseful.MarchandSmithemphasizerepeatedlythatanynewmodels,methods,orconstructs
proposedmustbeEvaluatedagainstexistingonesbeforetheirresearchefficacycanbeestablished.Wecontendthatany
newconstructs,methods,models,orimplementationsineventsordatabaseaccountingthatignorethesemanticand
structuringorientationsoftheREAmodelwouldnotbejustifiableasadvancesinthefield.Forexample,aproposedsystem
thatcontainsadatabaseorientationbutwhichdeclarativelymodelsaccountingartifacts(debits,credits,accounts)as
primitivesmustproveitssuperiorityoverapuresemanticdatabasethatdirectlymodelsrealworldeconomicphenomena.
Webelievethatsemanticaccountingmodelsmustalsohaveastructuringorientationiftheyaretoserveasa
foundationforenterprisewidemodelshowever,therecouldcertainlybealternativestoREAsmethodsofstructuring.March
andSmithsframeworkfirmlyplacestheburdenofproofonresearchersproposingsuchalternativestodemonstratethat
theyEvaluatewellagainstREAsmethodsonsomedefinitivemetrics.Thus,forexample,itisnotacceptabletosimplysay
objectorientedsystemsareperceivedtobeanadvanceovermoredeclarativesemanticformalisms(suchasentity
relationshipmodeling,dataabstraction,orNijssensInformationAnalysesMethodology(NIAM)),thereforeanyobjectoriented
accountingsystemisbetterthantheaccountingsystemsalreadybuiltwhichusedthosepriorframeworks.Onemustdefine
specificmetricsforevaluatingthetwomodelsanddemonstratewherethepreviousworkfallsshortonthosemetrics.Inthe
caseofobjectorientation,webelievethatsucheffortswouldfindmanyoftheadvantagestobealreadypresentinexisting
REAwork(McCarthyandRockwell1989GeertsandMcCarthy1992).Inotherwords,everynewsoftwareideaisnot
automaticallyresearchwhenitisappliedforthefirsttimetoanaccountingdomain.
PotentiallyproductiveextensionsinREAaccountingresearchcouldinclude(1)useofREAtoexplicatebetter
methods,constructs,orinstantiationsor(2)buildingbetterinstantiationsofaccountingsystemsthantheonesreviewed
here.
Anexampleofresearchfittingthefirstcategoryisdevelopmentoftheconstructofepistemologicaladequacy
(McCarthyandHayes1969)foraccountingsystems(GeertsandMcCarthy1992).Thedefinitionofthisconstructstems
fromtheideathatasystemconsistsofrepeatedoccurrencesofthestructuredREAtemplate.Otherexampleswould
includetheuseofREAasafoundationformanufacturingsystems,asproposedbyDennaetal.(1994)andbyGrabskiand
Marsh(1994).Forthesecondcategory,MarchandSmithpointoutthatinstantiationsofferproofoffeasibilityofconstructs,
models,andmethodstheseresultingartifactsthenbecometheobjectsofstudy.SinceREAhasbeeninstantiatedbothin
prototypesystemsandincorporateimplementations(Cherringtonetal.1993),researchincategory2couldinclude
instantiationofotherproposedaccountingmodelsandevaluationofthoseinstantiationscomparedtoexistingprototypes
andimplementations.

TheTheorizeandJustifyCategories
ThegreatestneedforREAaccountingresearchappearstobeintheTheorizeandJustifycolumns,i.e.,the
empiricalrealm.TheonlytwoempiricalstudiesreviewedinsectionIIwereBenbasatandDexter(1979)andWeber(1986).
BenbasatandDexterstudiedindividualbehaviorWeberexaminedorganizationallevelphenomena.Potentiallyproductive
validationsoftheREAmodelcouldlikewiseincludestudiesateithertheindividuallevelorattheorganizationlevel.

IndividualUserValidationStudies
Thestudyofindividualusersbehaviorasameansofvalidatingaccountingsystemsandmodelsisanareathathas
beenlargelyuntouchedinaccountingsystemsresearchandthusprovidesavastarrayofresearchpossibilities.Existing
instantiationsofREAaccountingconstructs,models,andmethodscanbetestedwithuserperformanceasavalidation
criteria.Theoriescanbegeneratedastowhyperformancewithoneinstantiationwouldbeexpectedtosurpassthatwiththe
othertestscanbeconductedtojustifythetheories.
Studiesinthiscategorycouldbelaboratoryexperiments,fieldtestswhereusersarequestioneddirectly,orsurvey
research.MeasuresofuserperformanceincludedinotherISstudies(e.g.Jihetal.1989)haveincludeddecisionquality,
decisioncompletiontime,andusersatisfaction.Decisionqualityhasbeenmeasuredasaccuracy(instudieswherethere
arecorrectanswers),asbestresult(suchashighestprofitwheredecisionsaffectedprofitorlowestcostwheredecisions
affectedcosts),orasconsensus(instudieswheretherewasnocorrectanswerorbestresultpossible,itwasdetermined
thattheextenttowhichexpertsagreedwiththedecisionindicatedhowgooditwas).Decisioncompletiontimemaybe
measuredasamountoftimetomakeadecision.Alternativelyitmaybemeasuredmorefinely,forexample,through
processtracesindicatinghowmuchtimeasubjectspentlookingatparticularcomputerscreenswithinasystem.
SuggestionsformeasuringusersatisfactionarepresentedbySeddonandKiew(1994).
Dunn(1995)isanexampleinthiscategorythatencompassesallfourcolumnsoftheMarchandSmithframework.
McCarthy(1982,1987)andGalandMcCarthy(1995)suggestedtheuseofabstractionhierarchiesasdevelopedbySmith
andSmith(1977)inconjunctionwiththeREAmodel.Theyproposedasevenlevelabstractionhierarchywhichcouldbe
usedtocontrolcomplexityinaccountingsystems.DunnbuiltaninstantiationofthisREAabstractionhierarchyasan
interfacetoanREAdatabase,andshealsobuiltaninstantiationofanonabstractioninterface.Basedonpriorbehavioral
accountingandcomputersciencestudies,Dunndevelopedhypothesesastowhytheabstractionhierarchyinterfaceshould
assistuserswithvariouscognitiveprocessesinvolvedinpreparationoffinancialstatementsfromadatabase,thereby
enhancingtheirperformanceofthattask.Sheconductedalaboratoryexperimenttoevaluatethetwoinstantiationsandto
justifyherproposedhypotheses.Thehypotheseswerenotsupported,openinguparesearchavenuetodevelopalternative
hypothesesastowhytheinstantiationdidnotworkaspredicted.

OrganizationLevelValidationStudies
Thestudyoforganizationlevelphenomenaasameansofvalidatingaccountingsystemsormodelshaslikewise
beengivenlittleattentioninaccountingsystemsresearchwiththeexceptionofWeber(1986).Studiesinthiscategory
wouldhaveastheirprimaryintentadeterminationofwhetherdatabase,semanticallymodeled,orREAsystemsprovetheir
allegedadvantages.Bynature,studiesinthiscategorycouldbeeitherfieldstudiesoreconometricanalysessuchasare
foundinthefinancialaccountingmarketsliterature.
OneapproachthatcanbetakeninorganizationalstudiesisthatusedbyWeber(1986).TermedEconomic
DarwinismbyZimmerman(1995),thisapproachsuggeststhatanactivityengagedinbysurvivingandpresumedly
economicallyrationalorganizationsoverextendedperiodsoftimemustbeyieldingbenefitsinexcessofitscost(thoughit
maynotbenecessarilyoptimal).Thissuggests,forexample,ifexistingfirmsareusingtheREAmodeloritsconstructsin
someconceptualorcompromisedfashion,suchimplementationsmusthavebenefitsthatexceedtheircosts.Asecond
approachtoorganizationlevelstudiesistoobserveimplementationsofevents,database,semanticallymodeled,orREA
accountingsystemsandtomeasurespecificindicatorsofISsuccess,suchaseconomicperformance,productivity,
competitiveadvantage,etc.David(1995)takessuchanapproach.Sheconductedafieldstudyinwhichsheevaluated
companies'accountinginformationsystemsastotheextenttheyincorporateREAsemanticsandstructure.Shealso
measuredvariousISsuccessindicators.ShethencomparedeachsystemsdegreeofREAcorrespondencetoitssuccess
indicatorstogainevidenceastothespecificbenefitstheREAmodelcanproduce.

SectionSummary
Inthissection,weproposedaframeworkbasedonMarchandSmith(forthcoming)forevaluatingfutureresearch
projectsinthedomainofaccountinginformationsystems.Itiscertainlyouropinionthatasubstantialamountofboth
empiricalandnonempiricalworkremainstobedone.Designscienceemphasizescomputersciencetraditionspotential
newprojectsshouldconcentrateonbuildingnewconstructs,models,andmethodsandthenevaluatingthemwithspecific
metricsagainstthedatabase,semantic,orstructuringorientationsofexistingaccountingmodels.Naturalscience
emphasizestraditionalsocialscienceresearchmethodspotentialnewprojectsshouldconcentrateondevelopingtheories
aboutexistingconstructs,models,methods,andinstantiations,andthenjustifyingthetheoriesthroughempiricaltests.We
believethatthereisconsiderablymorepotentialfornaturalscienceworkinaccountingsystemsresearchthanthereisfor
designsciencework.Therehasbeenfarlessnaturalscienceresearchdoneinaccountingsystems,andthesocialscience
researchmethodsaremuchmorefamiliartoawiderspectrumofaccountingresearchers.

V.Conclusion
Thispaperhasconcentratedonpastresearchworkinaccountinginformationsystemshowever,itsmostimportant
implicationsareclearlyforthefuture.Ahalfcenturyago,Goetz(1939)andSchmalenbach(1948)foresawtheneedfor
accountingsystemstoadaptascompetitivebusinessenvironmentsthemselveschange.Toalargeextent,their
suggestionslayfallowformanyyearsuntiltheenablingeffectofinformationtechnology,especiallywithregardtothe
possibilitiesfordatabaseimplementations,begantoaffectAISresearchandpractice.TheeventsideasofSorter(1969)
werenotthemselvestheblueprintformodernsemanticmodelsofenterpriseeconomicphenomena,buttheirpublicairing
wasinterpretedby1970sresearcherslikeColantonietal.(1971)asacallforresearchintomoredisaggregatetransaction
processingsystemsusingdatabasetechnology.Thesedatabaseaccountingsystemseventuallyledtotheintroductionof
semanticmodelingbyMcCarthy(1979),aninnovationthatproducedaccountingsystemswhosestructuresand
philosophiesforusewerecongruentwiththeearlierideasofresearcherslikeGoetz(1939,1949).McCarthysREAwork
(1982)extendedsemanticworkfurtherandresultedinanobjecttemplateofeconomicresources,events,andagentsthat
wasproposedtomodelenterpriseeconomicactivitieswhensuchphenomenawerepatternedinarepetitiveandintegrated
fashion.TheprimitiveentityandrelationshiptypesoftheREAframeworkwerederivedwithsemanticabstractionmethods,
buttheirdefinitionsandusewerepartiallyexplainedwithtermsandideasderivedfromtheworkofIjiri(1975)andMattessich
(1964).Weber(1986)examinedthevalidityoftheREAmodelempiricallyandfoundthatitsmajorelementswere
incorporatedintosoftwarepackagesattheinfologicalorhighsemanticlevel.
Futureworkonsemanticallymodeledaccountingsystemsshouldproceedontwofronts.Withinthedesignscience
arena,REAideasshouldbeexpandedwithnewconstructs,methods,andinstantiations,whilesimultaneouslybeing
challengedwithextendedoralternativenewmodels.AnexampleofresearchdoingtheformerisGeertsandMcCarthy
(1992),whileresearchdoingthelatterisGeertsandMcCarthy(1994).Inthearenaofnaturalscienceresearch,thenew
accountinginformationsystemartifactsbeingproposedbyREAtheoristsandothermodelersneedabundantdosesof
empiricalexamination,suchasthatdonebyDunn(1995)andDavid(1995).Forprogressinthisfieldtooccuratafaster
pace,bothdesignscienceworkandnaturalscienceworkareimportant.Atpresent,however,webelievethattherelative
paucityofempiricalresultsandtherelativeabundance(andacceptability)ofacademicAISresearcherswithskillsand
interestinpursuingnaturalscienceresearchprojectswarrantconcentrationintheAIScommunityonworkofthat
type.

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TABLE1

CategorizationofAccountingFrameworks
Year Title Author Ideas
EventsAccounting
1969 Aneventsapproachtobasic Sorter Eventsaccounting
accountingtheory DisadvantagesofValuetheory
Operationalrules
1970 Towardsan"events"theoryof Johnson Forecastandobservationalverification
accounting criteria
Definitionofpermissibleaggregation
Mathematicalmodel
1962 Aninductiveapproachtoaccounting Schrader Differencebetweenobserveddataand
theory manipulateddata
DatabaseAccounting
1971 Aunifiedapproachtothetheoryof Colantoni,Manes Introductionofdatabaseconcepts
accountingandinformationsystems andWhinston Eventcoding
Keyalgebra
1975 Astructuringofaneventsaccounting Liebermanand Threepartstructure
informationsystem Whinston Userdefineddatabasecharacteristics
Selforganizingdatabasecapabilities
1976 Designofamultidimensional Hasemanand Hierarchicalorganizationofevents
accountingsystem Whinston database
Definitionofrestructuringfunctions
1977 Arelationalapproachtoaccounting Everestand Dataindependence
models Weber Normalization
SemanticallyModeledAccounting
1939 What'swrongwithaccounting? Goetz MaintainanunadulteratedBasic
HistoricalRecord
1949 Managementplanningandcontrol Goetz BasicPecuniaryRecordplusalegal
financialsupplement
1948 PretialeWirtschaftslenkung,Volume Schmalenbach Developabasicaccountingsystemwith
2[PretialeLenkung] noparticularobjective(aGrundrechnung)
1979 Anentityrelationshipviewof McCarthy Secondgenerationdatamodeling
accountingmodels Artifactfreedesign
REAAccounting
1982 TheREAaccountingmodel:A McCarthy REAaccountingmodel
generalizedframeworkforaccounting Generalizationhierarchies
systemsinashareddataenvironment Semanticexpressiveness
Enterprisewideconceptualschema

FIGURE1
REATemplate

FIGURE2
RevenueProcess

FIGURE3
EventsversusREAAccounting


FIGURE4
OverlapofAccountingFrameworks
FIGURE5
MarchandSmithITResearchFramework

Build Evaluate Theorize Justify

Constructs

Model

Method

Instantiation

ColumnHeadings=ResearchActivitiesRowHeadings=ResearchOutputs
LightShading=DesignScience
DarkShading=NaturalScience

SOURCE:AdaptedfromMarchandSmith(forthcoming)

EndNotes

[1]Thepartialsetoftablesinfigure3illustrateapossiblerelationalimplementationofthe
specifieddatamodelundercertaincardinalityassumptions.Differentassumptionsmight
necessitatemoreorlesstables.

[2]Today,artificialintelligence,objectoriented,andperhapsothertechnologiescouldbeused
toachievethispurpose.In1971,databasetechnologywastheonlypracticalmechanism
available.

[3]McCarthy(1979,1980,1982)usedideasandconstructsadaptedfromMcCarthy(1978)
wherethetermeventsbasedaccountingsystemwasusedtodescribeexplicitlysemantic
systems.

[4]ThesemanticorientationofREAaccountingsystemsissometimesmistakenlytiedtothe
exclusiveuseofChens(1976)entityrelationshipmodel(e.g.,seeMurthyandWiggins
(1993,109)).Sucharestrictionisamistake.The1982discussionofdataabstraction
mechanismsandbehavioralsemanticsbyMcCarthywasmuchmoregeneralthanChens
originalwork.Additionally,bothheandothershavecoveredthesequestionsinrelated
worksincethattime.ForexamplesofalternativeREAspecificationswithdifferent
semanticformalisms(suchasNIAM,logicprogramming,andobjectorientation),see
GeertsandMcCarthy(1991),Geerts(1993),andRockwell(1992).

[5]PartofthistablehasbeenadaptedfromMcCarthy(1981).

[6]Later,WhinstonalongwithHaseman(HasemanandWhinston1977)developedan
implementationofanaccountingsystem,butitdidnotfollowtheColantonietal.model.It
wassimplyatraditionalaccountingmodelthatwasmodeledasanetwork.


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