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The Integration of an Accounting Domain Ontology (REA) within an Upper Ontology (SUMO)

Bill McCarthy, Michigan State Universitymccarthy@bus.msu.edu

http://wwww.msu.edu/user/mccarth4/

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SOURCES:• REA – The Ontological Foundations of REA Enterprise Information Systems, Guido Geerts and William McCarthy, March 2005

• SUMO – Towards a Standard Upper Ontology, Ian Niles and Adam Pease, Towards a Standard Upper Ontology. In Proceedings of the 2nd International Conference on Formal Ontology in Information Systems (FOIS-2001), Chris Welty and Barry Smith, eds, Ogunquit, Maine, October 17-19, 2001.

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Motivation ?• Why accounting ?• Why REA ?

– Research – peer review– Teaching

• Why Ontology ?– Interoperability & standard semantics– UN, ISO, ECIMF

• Why SUMO ?– Serve as model above with connections to real world

phenomena– Serve as model below with connections to real world

phenomena– Availability & peer review– Tractability– Coming market presence

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Cookie-Monster (the customer) and Elmo (the entrepreneur) meet in the (real or virtual) marketplace, thus setting the

stage for an Economic Exchange

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Give

Take

Economic Resource

inside participatio

n

outside participatio

n

outside participatio

n

inside participatio

n

stock-flow

stock-flow

Economic Event

Economic Agent

Economic Agent

Economic Agent

Economic Agent

Economic Resource

duality

Economic Event

REA model of cookie sale from entrepreneur’s (ELMO) perspective

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Give

Take

Economic Resource

inside participatio

n

outside participatio

n

outside participatio

n

inside participatio

n

stock-flow

stock-flow

Economic Event

Economic Agent

Economic Agent

Economic Agent

Economic Agent

Economic Resource

duality

Economic Event

REA model of cookie sale from entrepreneur’s (ELMO) perspective

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Give

Take

Economic Resource

inside participatio

n

outside participatio

n

outside participatio

n

inside participatio

n

stock-flow

stock-flow

Economic Event

Cash Receipt

Economic Agent

Salesperson

Economic Agent

Customer

Economic Agent

Customer

Economic Agent

Cashier

Cash

Economic Resource

Cookies

duality

Economic Event

Sale

more general exchange model from the entrepreneur’s (ELMO’s) internal perspective

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Product#

Description

Price

QOH

P-1 Chocolate Chip

1.05 200

P-2 Chocolate .95 205

P-3 Peanut Butter

1.00 97

P-4 Pecan 1.10 257

Invoice#

Receipt Timestam

p

Amount Applied

I-1 2JUL0830 14.75

I-2 3JUL0800 2.00

I-2 5JUL0800 18.00

I-3 8JUL1145 9.90

I-4 8JUL1145 9.20

Invoice# Dollar Amoun

t

Date

Salesperson

Employee#

Customer #

I-1 14.75 1JUL E-1234 C-987

I-2 20.00 2JUL E-1235 C-888

I-3 9.90 3JUL E-1236 C-999

I-4 9.20 5JUL E-1237 C-999

Product# Invoice# Quantity

P-2 I-1 5

P-3 I-1 10

P-3 I-2 20

P-4 I-3 9

P-1 I-4 4

P-3 I-4 5

COOKIES

SALE

COOKIES-stockflow-SALE

SALE-duality-CASH_RECEIPT

Partial Database for Elmo’s Cookie Business

Why is this invoice amount $14.75 ??How is customer paying for

this ???

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What actually occurred

What could be or should be

What is planned or scheduled

Commit Event

Rtype

Etype

Atype

Rtype Etype Atype

Resource Event Agent

REA model – the elevator pitch

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Figure 1 -- Normative Primitives of the REA Ontology

Economic Event

Economic Agent

stock-flow

duality

Economic Resource

participation

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linkage{composition}

EconomicEvent

EconomicAgent

EconomicResource

duality

Figure 2 -- Association, Linkage, Custody, and Claim Relationships

custody

association{responsibility, assignment,

cooperation}

materializes settles

EconomicClaim

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Exchange

Customer

CarMaintained Car

Labor

Cash

Revenue

RentalContract

RentalAgent

Customer

CashReceipt

Cash

Cashier

Figure 3 -- REA 3-level architecture

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Payroll

Process

Cash

Acquisition

Process

Cash

LaborLabor

Maintenance

Process

Cash

LaborLabor

Car

CarRevenue

ProcessCash

Maintained Car

Labor Labor

Exchange

Customer

CarMaintained Car

Labor

Cash

Revenue

RentalContract

RentalAgent

Customer

CashReceipt

Cash

Cashier

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Accept Customer Contact

Assess Customer NeedsCheck Car File & Choose

Assess Insurance Options & CreditFill in Contract

Customer Pays

Find Car & Provide Keys

Return Car

Update Files

Check Out Car

Payroll

Process

Cash

Acquisition

Process

Cash

LaborLabor

Maintenance

Process

Cash

LaborLabor

Car

CarRevenue

ProcessCash

Maintained Car

Labor Labor

Exchange

Customer

CarMaintained Car

Labor

Cash

Revenue

RentalContract

RentalAgent

Customer

CashReceipt

Cash

Cashier

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Figure 4 – Three-Level Architecture Model

Business Event

task-composition

workflow

Value Chain

networked

Business Process

Economic Event

duality

aggregate

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Salespeople

Tom

Dick

Ashley

Harry

Jane

Named Set of Objects with Labeled Clusters

Group & Name Clusters Cashiers

Harry

Jane

Named Set of Objects

Tom

Dick

Ashley

Economic Agents

Figure 6 -- Typifying to Planning & Control Level

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Typ

ifiy

Gro

upin

g

Salespeople

Tom

Dick

Ashley

Harry

Jane

Named Set of Objects with Labeled Clusters

Group & Name Clusters Cashiers

Named Set of Groups

Cashiers

Salespeople

Economic Agent Type

Harry

Jane

Named Set of Objects

Tom

Dick

Ashley

Economic Agents

Operational Level

Planning & Control level

Figure 6 -- Typifying to Planning & Control Level

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Economic Resource

EconomicEvent

Economic Agent

ResourceType

Event Type

Agent Type

REA Typing Extensions

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Economic Resource

EconomicEvent

Economic Agent

Economic Resource

Type

Economic Event Type

Economic Agent Type

Figure 7 – Type Connections for Control and Planning

policy/ standard

stock-flow participation

typify typify typify

policy/ standard

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Figure 8 -- Subtypes (possible) for ECONOMIC RESOURCE

Economic Resource

compositionEconomic Resource

Typetypifystructure

Services Rights Goods

Intellectual Product

(IPR)

Real Estate

Regulatory Service

Transport-ation

Services

Materials Human Services

Funds Right of Way

Warranty Insurance

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Figure 9 -- Subtypes of Economic Agent for an Exchange

Economic Agent

Mediator Guarantor NotaryEscrow

Third PartyRegulatorPartner

SellerBuyer

Economic Agent Type

typify

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Economic Agreeme

nt

commitment reciprocal

fulfills

commitment

fulfills

Fig. 5 – Agreement as a Bundle of Commitments

economic event

duality economic event

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Commitment

specifies

Resource Type

specifies Event Type

specifies

Agent Type

Fig. 10 – Abstract Specification of Commitments

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• Planning: In the Planning Phase, both the buyer and seller are engaged in activities to decide what action to take for acquiring or selling a good, service, and/or right.

• Identification: The Identification Phase pertains to all those actions or events whereby data is interchanged among potential buyers and sellers in order to establish a one-to-one linkage.

•  Negotiation: The Negotiation Phase pertains to all those actions and events involving the exchange of information following the Identification Phase where a potential buyer and seller have (1) identified the nature of good(s) and/or service(s) to be provided; and, (2) identified each other at a level of certainty. The process of negotiation is directed at achieving an explicit, mutually understood, and agreed upon goal of a business collaboration and associated terms and conditions. This may include such things as the detailed specification of the good, service, and/or right, quantity, pricing, after sales servicing, delivery requirements, financing, use of agents and/or third parties, etc.

• Actualization: The Actualization Phase pertains to all activities or events necessary for the execution of the results of the negotiation for an actual business transaction. Normally the seller produces or assembles the goods, starts providing the services, prepares and completes the delivery of good, service, and/or right, etc., to the buyer as agreed according to the terms and conditions agreed upon at the termination of the Negotiation Phase. Likewise, the buyer begins the transfer of acceptable equivalent value, usually in money, to the seller providing the good, service, and/or right.

• Post-Actualization: The Post-Actualization Phase includes all of the activities or events and associated exchanges of information that occur between the buyer and the seller after the agreed upon good, service, and/or right is deemed to have been delivered. These can be activities pertaining to warranty coverage, service after sales, post-sales financing such as monthly payments or other financial arrangements, consumer complaint handling and redress or some general post-actualization relationships between buyer and seller.

SOURCE: ISO FDIS 15944-1 – Operational Aspects of Open-edi for implementation Figure 11 -- ISO Open-edi Phases of a Business Process

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Business Process Phases Ontological Components

Negotiation

Identification

Planning

Post-Actualization

Actualization

typify

fulfillment

Business Events with Types of

Resources & Agents

Business Events with Commitments for Types of

Resources, Events, and Agents

Business & Economic Events with Resources &

Agents

BP Phases with Components

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BT Phase Example Business Event Planning Seller publishes Catalog

Buyer sends CatalogRequest to Seller

Seller sends Catalog to Prospective Buyer

Identification Buyer sends AvailabilityandPriceRequest to Seller

Seller returns AvailabilityandPriceResult to Buyer

Negotiation Seller sends OrderRequest to Buyer

Buyer sends Offer to Seller

Seller sends CounterOffer to Buyer

Buyer sends an OrderAcceptance to Seller for parts (alternatively a NonAcceptance would suspend or abandon the Business Transaction)

Actualization Seller sends an AdvanceShippingNotice when goods are prepared for shipping

Buyer sends ReceivingReport to Seller when inspected goods are accepted

Seller sends an Invoice to Buyer after parts are shipped

Buyer sends RemittanceAdvice to Seller with information about payment of the Invoice

Post-Actualization

Buyer sends WarrantyInvocation to Seller

An Example Business Transaction with Business Events Grouped in Phases

27ISO Collaboration Ontology

Bilateral Collaboration

governs

Economic Event

Economic Resource

Economic Agent

stockflow from

to

Economic Contract

Economic Commitment

reciprocal

fulfills

establish

duality

Economic Resource

Type

typifies

specifies

Economic Event Type

Economic Agent Type

specifies

specifies

typifies

qualifies

reserves

involves

PartnerThird Party

Mediated Collaboration

Business Process

participates

requires

Agreement

Regulator

constrains

Business Event

28Figure 12 -- The REA Ontology with BP Phases

Economic Event

Economic Resource

Economic Agent

stock-flow inside

outside

Economic Claim

Economic Agreement

Economic Commitment

materializes

settles

fulfills

establish

duality

Economic Resource

Type

typifyspecifies

Economic Event Type

Economic Agent Type

specifies

specifies

typify

typify

reciprocal

Business Event

Business Process Phases

Business Processgoverns

workflow

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Figure 13 – Business Objects, Lifecycles, and States

Business Object

Business Object

Lifecycle

Business Object State

Business EventtransitionedBy

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Sample Business Object

Example States (Lifecycles) for Business Object

Business Process • Waiting-Start • In-Service• Completed• Aborted• Suspended

Economic Claim • Materialized• Settled

Economic Resource Type • Candidate• Planned• Identified• Proposed• Specified• Substituted

Business Process Phase • Pending• In-Service• Complete

Figure 14 – Sample States for Business Objects

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EconomicResourceType

Candidate Planned

Identified

<<BusinessEvent>>

publishCatalog

<<BusinessEvent>>

sendCatalogRequest

<<BusinessEvent>>

acceptAvailabilityAndPriceRequest

Proposed <<BusinessEvent>>

sendOffer

<<BusinessEvent>>

shipAcceptableSubstitute

Substituted

<<BusinessEvent>>

acceptOffer

Specified

Figure 15 – State Machine Diagram for Economic Resource Type

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BusinessProcess

BusinessProcess

BusinessProcess

BusinessProcess

BusinessProcess

BusinessProcess

Independent view of Inter-enterprise events

Enterprise #1

Enterprise #1

Enterprise #2

BusinessProcess

BusinessProcess

BusinessProcess

Collaboration Perspective: Trading Partner vs. Independent

Trading Partner view of Inter-enterprise events (upstream vendors and downstream customers)

Dotted arrows represent flow of goods, services, and cash between different companies; solid arrows represent flows within companies

Different Views of Business Collaboration

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PORTFOLIO of ATTRIBUTES:

• ingredients

• baked

• advertised

• delivered

• guaranteed fresh

??

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To do ?• REA & this paper

– Independent view– State machine mechanics (exhaustive ?)

• Economics – more formal (bundle, “2”, etc.) • Standards & open source• Accounting

– Theory -- claim, temporal & sectional (ABC), various expensing, internal control specification, materialization

– Outreach – XBRL & financial reporting

• Philosophy – more formal (KIF), upper integration (SUMO), resolution of Bunge & events

• Computer Science – OO, patterns, contract languages• MIS

– Events & behavioral – leave to others

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SUMO questions ??

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Reality Token Category Type Image

Carol

Dick

Harry

Alice

Customer Customer Type

classification typification

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Physical Categories Abstract Categories

Continuant Occurrent Continuant Occurrent

1st

(Independent)

ObjectEconomicAgent (A)

EconomicResource (R)

ProcessEconomicEvent (E)

Commitment (C)

SchemaAgentType (AT)

ResourceType (RT)

ScriptEventType (ET)

CommitmentType (CT)

2nd

(Relative)

JunctureAssociation (A-A)

Custody (A-R)Linkage (R-R)

ParticipationStockFlow (E-R)Duality (E-E)Accountability (E-A)Fulfills (C-E) Involvement (C-A)Reserved (C-R)Reciprocal (C-C)

DescriptionTypification (A-AT) (R-RT)Characterization (AT-AT) (AT-RT) (RT-RT)

HistoryTypification

(E-ET)Specification

(C-RT)(C-ET)(C-AT)

Scenario (ET-RT) (ET-ET) (ET-AT)

3rd

(Mediating) StructureResponsibilityPartneringConfiguration

SituationExchange

ConversionContractingScheduling

Reason SegmentationPolicySubstitutabilityComplementarityConfiguration

PurposeStandardizationPolicyStrategy

SOWA analysis of REA (2002)

--------------------

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REA & SUMO terms

Economic Event stock-flow

Economic Resource participation

Economic Agent duality

Exchange reciprocal

Conversion fulfills

Economic Claim typify

Business Event policy

Economic Commitment

specifies

Economic Agreement

Event Type

Agent Type

Resource Type

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SUMO questions• General:

– REA is primarily schematic; SUMO is primarily taxonomic. How to integrate ? How far to decompose ?– Must MILO and other domain ontologies (financial) be aligned ?– 3D vs. 4D positions (endurantists vs. perdurantists)– How to deal with process decomposition and duration?

• Value (Supply) Chain – Business Process – BP phases – Economic Events – Business Events -- Smaller Business Events

– Nature of abstract specification (typification)• Specifics:

– Economic Resources like services and rights – Objects ?– human & organizational agents ?– CaseRole ? ChangeOfPossession ? More general predicates with attached reasoning