3 ms·

>At the heart of each REA model there is usually a pair of events, linked by an exchange relationship, typically referred to as the "duality" relation. One of t

>At the heart of each REA model there is usually a pair of events, linked by an exchange relationship, typically referred to as the "duality" relation. One of these events usually represents a resource being given away or lost, while the other represents a resource being received or gained. So, debit and credits. The Wikipedia article does little to really explain how it works. How, for example, does a bank contemplating making a loan to the business evaluate its profitability and cash flow, or the liquidity of its assets? (After all, most bankruptcies are not because the business has negative net worth, but because it hasn't enough liquid assets to cover operational expenses).

naasking 3y ago
> So, debit and credits. Debits and credits can be seen as a type of resource flow in REA, but not all resource flows are debits and credits. A debit-credit architecture does not require linking resource flows with their duals, and those that do are likely a limited type of REA system. This loses important information. Assessing value need not be any different in most cases. The point behind REA is not to change established methods of evaluating such questions for domain experts, but to show how traditional accounting abstractions are not core information abstractions and so shouldn't be modelled directly in computers, but should be derived views of a more general architecture.