Part 2: The Professor

Accounting was perhaps the first documented reporting process, and almost all types of reporting processes are built upon its ideas and approaches in some measure. It has been highly developed over centuries, and can handle a myriad of needs in sophisticated ways. I believe anyone that is going to deal with reporting processes should understand the basics of accounting, and computers which are now integral to it.

Let me emphasize this point: Understanding accounting will provide insight into all types of reporting and many types of analytical functions.

The following chapters start by explaining these basics, but do not end there. They begin to show that we can change how we have automated these things and satisfy many more needs in a much more efficient manner. Yet doing so requires that the finance systems change fundamentally.

McCarthy, seventeen years after his initial paper, wrote the following about its impact. “REA theory has expanded considerably…. However the rate of this progress and the assimilation of REA work into the mainstream ideas of accounting have not been without problems and impediments.” “Completely customized implementation of a new enterprise information system is not a common occurrence…”1

Accountants aren’t known for their flexibility. At times, they obscure the essence of a matter, citing accounting traditions and standards. If finance people want the information they provide to continue to be relevant, they must consider if alternative approaches are possible to the standard system architecture. The Business Events and Resources and Agents present a measured approach to considering what really is and is not required.

Eric Denna has written “To assess whether an alternative system architecture is viable to meet the needs of information customers, it is important to focus not on whether the alternative emulates the traditional mode of processing and data storage, but whether it is able to accomplish the desired objectives of the traditional architecture, and much more.”2

REAL Analysis Method presents a view of the theory. This is important as it shows where we may be going. We don’t yet build systems this way, but some day we likely will; our needs for better reporting and more flexible systems architecture will drive us there inexorably.

In this Part:

1 William E. McCarthy, Semantic Modeling in Accounting Education, Practice, and Research: Some Progress and Impediments Published in: Conceptual Modeling: Current Issues and Future Directions, 1999, pages 147 and 150, (April 2008).
2 Anita Sawyer Hollander, Eric L. Denna, J. Owen Cherrington, Accounting, Information Technology, and Business Solutions 2nd ed. (© McGraw-Hill Companies Inc.: 2000) p. 499. Emphasis added.