Working paper · 2021
Accounting Contracts in Collaboration Space
Summary
Not yet published in a journal. The full text is chapter 4 of the PhD thesis.
Every company keeps its own record of the same deal: the seller books a sale, the buyer books a purchase, and the two are reconciled later. The resource-event-agent (REA) accounting model, introduced by William E. McCarthy in 1982, proposed a different idea: describe the economic exchange itself, once, independently of either party's books.
This paper uses distributed ledger technology to make that idea work in practice. It presents a design theory and a blockchain prototype that implements the REA model as a business process state machine. The exchange between companies, or between a company and a government agency, lives in a shared repository outside the parties' enterprise systems, which the paper calls collaboration space.
The design builds on two standards, ISO/IEC 15944-21 on distributed business transaction repositories and Universal Business Language for business documents, and it extends the economics of blockchain ledgers. The state machines and smart contract code are published openly, with a narrated video of the prototype.
Explainer
Key findings
- An independent, shared view of business transactions between companies is technologically feasible with distributed ledgers.
- Implementing REA as a state machine lets smart contracts orchestrate the reciprocal delivery of goods, services and payment.
- Building on ISO/IEC 15944-21 and Universal Business Language ties the design to standards practice already uses.
- The result is a design theory, the most general contribution in the thesis, which other researchers can test and extend.
How to cite
Søgaard, J. S., McCarthy, W. E., Herskind, L., & Holman, G. K. (2021). Accounting Contracts in Collaboration Space. Chapter of the PhD thesis, Copenhagen Business School, PhD Series 33.2021.