Theory of Documentation

The Theory of Documentation is a metatheory which is part of the Seattle Method and describes the information which is provided, traditionally in the form of a document, which is the source of a business event and commonly ultimately part of a financial transaction.

The Theory of Documentation considers the standard Semantics of Business Vocabulary and Business Rules (SBVR) which specifies how to create vocabularies and rules for creating them and the OASIS standard and ISO/IEC standard Universal Business Language (UBL) which is a standard for creating business documents.

First, it is important to understand the terms "documentation" and "document" as we are using these concepts.  Documentation is the information contained within a document which is the source of a business event.  A document, as we will define it here, is the set of all documentation that wears the "costume" of a document which memorializes the information related to a business event. A document is a "container".

A document is best understood as a structured container of information that memorializes a business event. Documentation is simply the information contained and structured within a document.

Accounting is fundamentally a system for recording, classifying, and summarizing information about business events. Documents are the primary evidence of those events. They anchor transactions in verifiable reality.  For example,

• A purchase order initiates a commitment
• An invoice asserts a claim
• A check and remittance advice document settlement
• A bank statement summarizes the state of cash based on a set of cash flows

Business events and financial transactions don't emerge out of thin air.  These documents and the documentation in the form of information they contain are the raw material from which the source of business event information and then the resulting financial transactions information are derived.

Note that a document can be an artifact written on a piece of paper, a document can be an electronic document which is structured for presentation of information for interpretation by humans, and a document can be in digital form structured for meaning represented in the form of a graph of information that is interpretable by machine based processes and that same graph representation of information can be projected in a presentation which can be read by and interpreted by humans.

By way of example, a document as we are using the concept is used in cross border paperless trade. All of the following are cross border trade documents: bill of lading, commercial invoice, packing list, certificate of origin, customs declaration, warehouse receipt, insurance certificate.

Again, by way of example; each of the following is a common norm, convention, or standard document used to capture information about business events:

• Invoice
• Purchase invoice
• Sales invoice
• Order
• Purchase order
• Sales order
• Check
• Deposit
• Remittance advice
• Memorandum
• Contract
• Shipping manifest
• Schedule

Different types of business processes/workflows use different sets of documents.  For example, as Data Centric Accounting (DCA) from The Future of Accounting points out three common business workflows:

• Procure to pay
• Order to cash
• Make

Different types of business events generate different sets of documents. For example, the business event "Proceeds from Collection of Receivables" involves receiving a check with perhaps a remittance advice which is summarized in a deposit.

A "statement of account" which summarizes what is due on a customer account or a "bank statement" which summarizes bank transactions and even a "financial statement" are documents, but those documents summarize the "state" of business events as contrast to generating an actual business event which would result in a financial transaction.

The workflow(s) in which documentation is used is separate from the actual documentation itself. Digital signatures and digital hashes to make sure of the authenticity of documentation and to assure that documents have not been tampered with are part of documentation.  Traceability/trackability and provenance are port of documentation.

While in the past a "document" could be:

• a paper artifact,
• a human‑readable electronic file (PDF, HTML, etc.), or
• a machine‑interpretable graph of information.

Things are evolving.  More and more, modern accounting increasingly depends on digital provenance, traceability, signatures, and tamper‑proofing; all of which are now part of documentation itself.  There really should only be ONE VERSION of documentation, one "version of the truth".  What makes the most sense is to go with the least common denominator which is a machine-interpretable graph of information from which a projection of that information can be reliably generated for human consumption when necessary.  The alternative; trying to get a machine to properly interpret what humans create which can be quite arbitrary; is not scalable.

Do we really want two versions of source documents when that can be avoided? Understand that a document provides:

• Evidence: supporting audit trails and internal controls
• Structure: standard forms (invoices, purchase orders, shipping manifests) organize business information consistently
• Meaning: standard semantics like SBVR and UBL and REA define shared vocabularies and document models for interoperable business reporting
• Input to financial statements: some documents summarize the state of business events (e.g., bank statements, account statements, financial statements) rather than generating new ones
• Input to financial analysis models: ultimately all this effort yields the ability to analyze what is going on for various reasons (e.g. management, regulatory compliance, capital allocation)

In short, documents are the bridge between economic reality and the accounting system representation and interpretation of that reality. Audit and assurance is about making sure the accounting system interpretation is consistent with what regulators specify.  Documents and documentation they contain are the first semantic layer in the chain that ultimately produces financial statements, analytics, and compliance reporting.  

If this first layer is suboptimal; there is in impact to everything else downstream.  Seems like you would want to get that first layer right.

Additional Information:

• Document is a "Costume" a Financial Statement Wears
• What is a Document? (Sean McGrath)
• Document (Wikipedia)
• Standards for Interconnecting the Enterprise Stack
• Modern Version of Ricordanze
• Digital Information Organism
• Accounting & Audit by Design (A&AD) Framework