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Developing An Rea Diagram

To develop an REA diagram for a transaction cycle, there are three steps. The first step is to identify the events about which management wants information, which must include a "give" event that reduces a resource and a "get" event that increases a resource. Typical revenue cycle events include taking a customer order, filling the order, billing the customer, and collecting payment. Accounts receivable is not represented as a resource in an REA model.

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83 views8 pages

Developing An Rea Diagram

To develop an REA diagram for a transaction cycle, there are three steps. The first step is to identify the events about which management wants information, which must include a "give" event that reduces a resource and a "get" event that increases a resource. Typical revenue cycle events include taking a customer order, filling the order, billing the customer, and collecting payment. Accounts receivable is not represented as a resource in an REA model.

Uploaded by

Putri Hapsari
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
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DEVELOPING AN REA DIAGRAM

STEP ONE

To design an REA diagram for an entire AIS, one would develop a model for each transaction cycle and then integrate the separate diagrams into an enterprise-wide model. In this chapter, we focus on the individual transaction cycles.

Developing an REA diagram for a specific transaction cycle consists of three steps:
STEP ONE: Identify the events about which management wants to collect information. STEP TWO: Identify the resources affected by the events and the agents who participated. STEP THREE: Determine the cardinalities between the relationships.

At a minimum, every REA model must include the two events that represent the basic giveto-get economic exchange performed in that transaction cycle. The give event reduces one of the organizations resources. The get event increases a resource.

Example: Typical activities in the revenue cycle include:


Take customer order Fill customer order Bill customer Collect payment

Although accounts receivable is an asset in financial reporting, it is not represented as a resource in an REA model.
It represents the difference between total sales to a customer and total cash collections from the customer. The information to calculate an accounts receivable balance is already there because the sales and cash receipt information is captured.

Events that pertain to entering data or repackaging data in some way do not appear on the REA model. In completing the first step of an REA diagram, the event entities are typically drawn from top to bottom in the sequence in which they normally occur.

Take Order

Sale

Receive Cash

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