Use Case - AR/AP Settlement

Community: 



AR/AP entries of the debtor at obligation-time, assuming it was for goods:
Ledger TransactionSet
DebtorCompanyInc  
TransactionDate  
2001/07/21  
Account Dr/Cr Amount Party Quantity ProductOrService DueDate SettlementMethod
Purchases D 1100    5 Widgets    
AP C -1100 CreditorCo       2001/07/28 SettleAgentA.com

AR/AP entries of the debtor transferring debt to his settlement agent:

Ledger TransactionSet
DebtorCompanyInc  
TransactionDate  
2001/07/21  
Account Dr/Cr Amount Party EntryDoc DueDate SettlementMethod
AP D 1100 CreditorCo   2001/07/28  
AP C -1100 SettleAgentA Please pay CreditorCo, etc., etc.
This constitutes my promissory note, etc. 		 2001/07/28 SettleAgentA.com

AR/AP entries of the settlement agent, accepting Debtor's debt:
Ledger TransactionSet
SettleAgentA  
TransactionDate  
2001/07/21  
Account Dr/Cr Amount Party EntryDoc DueDate
AP D 1100 DebtorCompanyInc Please pay CreditorCo, etc., etc.
This constitutes my promissory note, etc. 		 2001/07/28
AP C -1100 CreditorCo DebtorCompanyInc owes CreditorCo. 2001/07/28

Now the settlement agent goes to a UDDI or ebXML etc. registry or directly to CreditorCo and 
asks, "Who is your settlement agent? I have a promissory note from Debtor $1100.00 payable to CreditorCo ." 
Electronically and at basically zero cost, SettleAgentA learns that SettleAgentB handles paper for CreditorCo.
Settlement agent B agrees to accept it, giving credit to settlement agent A because perhaps, he has
done some queries in the market and found a path to dispose of somebody elses' liabilities due 
and payable to debtor company.  So he bids 99.7% for pricing the paper.  SettleAgentA is in a hurry
and doesn't want to dick around finding another intermediary.  You can't legally advertise 
these paper in Canada as they become regulated securities if sold publicly.  And he doesn't
want to dick around with offering the paper on eBAY under a pseudonym, or using Settle'ster 
P2P settlement router.  Let's say he always charges the spread against DebtorCo anyway. 
So he accepts the 99.7% offer.

AR/AP entries of the settlement agent, relieving himself of Debtor's debt:

Ledger TransactionSet
SettleAgentA  
TransactionDate  
2001/07/28  
Account Dr/Cr Amount Party EntryDoc DueDate
AP D 1100 CreditorCo DebtorCompanyInc owes CreditorCo. 2001/07/28
AP C -1100 SettleAgentB DebtorCompanyInc owes CreditorCo.
This constitutes my promissory note, etc. 		 2001/07/28

Now at this point SettlementAgentA is finished because his account with SettlementAgentB either 
never closes, because it runs up and down netting lots of paper from lots of people, or, it can
easily be netted out at very thin discounts to numerous SettlementAgents, with peering 
arrangements in the AR/AP markets.

The standard chart of accounts (arapXML taxonomy for commerce) is as follows.

Cash
AR
Inventory
Other Assets
AP
Tax Payable
Other Liabilities      		Sales
Other Operating Income
COGS (Cost of Goods Sold)
Salaries/Wages
Goods Purchases
Services Purchases
Other Operating Expense
NonOperating Income/Expense


Multiparty netting exploration

Person Sells Buys
A
B
C
D
Food
Shelter
Energy
Transportation 		Shelter, Energy, Transportation
Food, Energy, Transportation
Food, Shelter, Transportation
Food, Shelter, Energy

Person A's Expenses for July:

Ledger TransactionSet
PersonA  
TransactionDate  
2001/07/31  
Account Dr/Cr Amount Party EntryDoc DueDate SettlementMethod
AP C -350 PersonB PersonA owes PersonB $750.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent1
AP C -235 PersonC PersonA owes PersonC $235.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent1
AP C -150 PersonD PersonA owes PersonD $150.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent1
Purchases D 350   PersonB Food    
Purchases D 235   PersonC Energy    
Purchases D 150   PersonD Transportation    

Note that the settlement agent who is in charge of paying is listed on promissory notes (AP). 

Person B's Expenses for July:

Ledger TransactionSet
PersonB  
TransactionDate  
2001/07/31  
Account Dr/Cr Amount Party EntryDoc DueDate SettlementMethod
AP C -300 PersonA PersonA owes PersonB $300.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent2
AP C -260 PersonC PersonA owes PersonC $260.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent2
AP C -120 PersonD PersonA owes PersonD $120.
This constitutes my promissory note, etc. 		 2001/07/31 SettleAgent2
Purchases D 350   PersonB Food    
Purchases D 235   PersonC Energy    
Purchases D 150   PersonD Transportation