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Pacioli in the Computer Age

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Accounting using the double entry bookkeeping mathematical model is a brilliantly engineered information system that, if utilized correctly, really can provide valuable outcomes. Initially developed in around 1211 CE by Italian bankers and then formally documented by Luca Pacioli in 1494 , double entry accounting will thrive in the era of artificial intelligence. Why? In order for artificial intelligence to make the best use of accounting information, the semantic fragmentation needs to be minimized. Minimizing that semantic fragmentation will allow traceability to be maximized. The human bucket brigade that is a significant portion of accounting, reporting, auditing, and analysis today will be rethought. At it's core, accounting is about capturing information related to business contract for an economic entity.  This is explained thoroughly by Theory of Accounting and Control . Those business contracts result in business events that are then entered into an accounting inform...
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Example Financial Statement Holon

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As I have mentioned in other posts on my blog, a financial statement is a formal semantic structure , in fact a financial statement is a special type of formal semantic structure referred to as a holon . As I mentioned in my blog posts, Kurt Cagle and Chloe Shannon are providing a lot of very good information about holons on their substack. I have provided a bunch of good examples of financial reporting frameworks and reports   In this blog post I want to focus on one specific financial statement and see if I can explain that a financial statement is a "container" of  blocks of information and the "information blocks" that the financial statement contains. Cagle and Shannon point out that a holon is made up of four distinct knowledge graphs which are: The Scene Graph or Interior State The Boundary Graph The Event Graph The Projection Graph What I want to do is explain all of the above as they relate to financial statements and provide examples of each of the above...
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Anatomy of an Information Block

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I have done my best to explain/describe what an information block  (a.k.a. block, fact set) is and what it does.  The best summary is here at this blog post, Core Pattern . Another explanation is in the document Blocks . This  Master Class in Representing Financial Statement Logic Using XBRL  represents the exact same information 10 different ways using XBRL where the information itself does not change,  only the XBRL technical syntax used to represent the information changes. Why are those 10 different examples important? Because they really help you get your head around the notion of the information block. Anything in an information block that is not made explicit is therefore implicit which means that you are allowing anyone and everyone to make whatever assumptions they choose to make. Implying something and making incorrect assumptions lead to defects in interpretation of information and the assumptions are a source and of confusion, misunderstanding, and c...
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The Zachman Framework for Enterprise Architecture

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The Zachman Framework is a comprehensive and structured tool and approach to thinking about and defining an enterprise. The framework provides a two-dimensional classification schema that intersects two classifications which forms a six rows by six columns matrix: (1) the primitive interrogatives (what, how, when, who, where, and why) in the columns and the concept of reification (transformation of an abstract idea into an instantiation) in the rows and (2) represent the different enterprise stakeholders and their perspective.  Here is that fundamental matrix: The Zachman Framework is widely used to provide structure for enterprise modeling. But the Zachman  Framework has its critics and limitations. But despite these limitations and criticisms, the Zachman Framework remains a significant tool for organizing and analyzing enterprise architecture, providing a holistic view of the environment and facilitating communication between different perspectives. Additional Information:...
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Financial Report is Special Type of Knowledge Graph, a Holon

As I have previously mentioned, a financial report is a knowledge graph .  But it turns out, a financial report is not just a knowledge graph...it is a special type of knowledge graph referred to as a holon .  Kurt Cagle has been posting some exceptional information about holons . If you are an accountant you may want to keep an I on this. Effectively, a holon is something that is simultaneously a whole in and of itself, as well as a part of a larger whole. Read this post to understand more .  As Kurt Cable point out, a holon is not just one knowledge graph, it is four graphs. Kurt explains these four graphs in general terms; I want to explain these four graph in more specific terms as they relate to the financial statement. This explanation is based on Kurt Cagle's article,  What Is a Holon? Part 1: The Graph as State Machine , as specifically applied to general purpose financial statements. The Scene Graph (i.e. interior state) The "scene graph" (a.k.a. interior st...
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Financial Statement is a Formal Semantic Structure

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A general purpose (or special purpose)  financial statement is a well-formed formal semantic structure.  That formal semantic structure can be explained.  A conceptualization can be created which explains that formal semantic structure. Further, a representation in software (i.e. implementation ) can be created per that conceptualization. (See the Triangle of Meaning for more information.) To be clear; by general purpose financial statement I mean the complete set of primary financial statements, the policies, the disclosure notes, and any supplementary information included. The general purpose financial statement might be compiled, reviewed, or audited. I have used TurboTax as an example of how something like a financial statement creation tool could be implemented in software.  These papers explain how this is done via TurboTax: Tax Knowledge Graph for a Smarter and More Personalized TurboTax Tax Knowledge Adventure: Ontologies that Analyze Corporate Tax Transac...
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Thoughts on Attaining Literacy

This blog post is a response to a LinkedIn post by Paul Wilkinson effectively calling for a literacy project . The literacy project relates to the notion of " XBRL for all " or "AI-powered personal finance reporting using XBRL — the same structured reporting language used by Fortune 500 companies, scaled for every individual." I agree with both things Paul is saying.  I agree that  personal finance can benefit from the same things Fortune 500 companies can benefit from.  And I also agree that what is needed to make that a reality is a literacy project, as opposed to a technology project. What is going on in the world seems to be misunderstood by many, if not most, people. Two key aspects of what is going on is the move to "digital" and harnessing the power of  "artificial intelligence". Very specifically, "digital" and "artificial intelligence" as applied to the following as stated by Paul: "Today, GAAP and IFRS are lang...
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