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Chapter 2 REA Part 2

1. The document discusses database design using the REA (Resources, Events, Agents) data model. It describes the steps for designing an accounting information system database using REA, including identifying relevant events, resources, and agents and drawing an REA diagram. 2. An REA diagram models business activities and policies by showing the relationships between events, resources, and agents. Events must be linked to both affected resources and other events, and each event must involve at least two agents. 3. Developing an REA diagram involves identifying relevant events, resources, and agents; determining the relationships between them; and specifying the cardinalities of those relationships.

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Lê Thái Vy
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97 views21 pages

Chapter 2 REA Part 2

1. The document discusses database design using the REA (Resources, Events, Agents) data model. It describes the steps for designing an accounting information system database using REA, including identifying relevant events, resources, and agents and drawing an REA diagram. 2. An REA diagram models business activities and policies by showing the relationships between events, resources, and agents. Events must be linked to both affected resources and other events, and each event must involve at least two agents. 3. Developing an REA diagram involves identifying relevant events, resources, and agents; determining the relationships between them; and specifying the cardinalities of those relationships.

Uploaded by

Lê Thái Vy
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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Download as PDF, TXT or read online on Scribd
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Database Design Using the REA

Data Model
Chapter 2 Part 2

2-1
Learning Objectives
1.  Discuss the steps for designing and
implementing a database system.
2.  Use the REA data model to design an AIS
database.
3.  Draw an REA diagram of an AIS database.
4.  Read an REA diagram and explain what it
reveals about the business activities and
policies of the organization being modeled.

2
Database Design Process

3
Data Modeling
•  Accountants may provide the greatest value by
taking responsibility for data modeling—the
process of defining a database to faithfully
represent all aspects of the organization,
including interactions with the external
environment.
▫  Occurs during both systems analysis and conceptual
design stage
▫  Two important tools to facilitate data modeling:
–  Entity-relationship diagramming
–  REA data model
ENTITY-RELATIONSHIP DIAGRAMS
• An entity-relationship (E-R)
diagram is a graphical technique for
portraying a database schema.
▫  Shows the various entities being
modeled and the important relationships
among them.
THE REA DATA MODEL
•  The REA data model was developed specifically
for use in designing accounting information
systems.
▫  The REA data model classifies entities into three
distinct categories: Resources, Events, and Agents
•  REA data models are usually depicted in the
form of E-R diagrams.
•  Therefore, we refer to E-R diagrams developed
with the REA model as REA diagrams.
REA Modeling
•  Resources
▫  Things that have economic value to the
organization (e.g., inventory, cash)
•  Events
▫  Various business activities that management
wants to collect information on
•  Agents
▫  People and organizations that participate in events
(both internal (e.g., employees) and external (e.g.,
customers/vendors) to the organization)

7
REA Basic Template

8
REA Diagram Rules
1.  Each event is linked to at least one resource that
it affects.
2.  Each event is linked to at least one other event.
▫  Types of links (relationships):
–  Get events
–  Give events
–  Participation events
3.  Each event is linked to at least two participating
agents.

9
THE REA DATA MODEL
• Rule 1: Every event entity must be linked to at
least one resource entity.
▫  Events must be linked to at least one resource that they
affect.
–  Some events affect the quantity of a resource:
–  If they increase the quantity of a resource, they are called a “get” event.
–  If they decrease the quantity of a resource they are called a “give”
event.
–  Example: If you purchase inventory for cash:
▫  The get event is that you receive inventory.
▫  The give event is that you pay cash.
–  Relationships that affect the quantity of a resource are sometimes
referred to as stockflow relationships.
THE REA DATA MODEL
–  Not every event directly alters the quantity of a
resource.
–  If a customer orders goods but has not paid and
has not received goods, this activity is called a
commitment event.
–  Organizations track the effects of commitments to
provide better service and for planning purposes.
THE REA DATA MODEL
• Rule 2: Every event entity must be linked to
at least one other event entity.
▫  Give and get events are linked together in what is
labeled an economic duality relationship.
▫  These relationships reflect the basic business
principle that organizations engage in activities that
use up resources in hopes of acquiring other
resources in exchange.
▫  Each accounting cycle can be described in terms of
give-to-get economic duality relationships.
17-13

Business Cycle Give–Get Relationships


THE REA DATA MODEL
•  Rule 3: Every event entity must be linked
to at least two participating agents.
▫  For accountability, organizations need to be able
to track actions of employees.
▫  Also need to monitor the status of commitments
and exchanges with outside parties.
▫  Each event links to at least two participating
agents.
THE REA DATA MODEL
•  For events that involve transactions with
external parties:
▫  The internal agent is the employee responsible for the
affected resource.
▫  The external agent is the outside party to the
transaction.
•  For internal events, such as transferring raw
materials to the production floor:
▫  The internal agent is the employee who gives up
responsibility or custody for the resource.
▫  The external agent is the one who receives it.
17-11

Revenue Cycle REA Diagram


DEVELOPING AN REA DIAGRAM
•  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
Developing an REA diagram for a specific transaction cycle
consists of three steps:
1.  Identify the events about which management wants to
collect information.
2.  Identify the resources affected by each event and the
agents who participate in those events.
▫  What economic resource is reduced by the “Give” event?
▫  What economic resource is acquired by the “Get” event?
▫  What economic resource is affected by a commitment event?
3.  Determine the cardinalities of each relationship.

18
Cardinalities
•  Describe the nature of relationships between
entities
▫  How many instances of one entity can be linked to each
specific instance of another entity
▫  Minimum can be: 0 or 1
▫  Maximum can be: 1 or Many

19
Three Types of Relationships
•  Relationship type is based on maximum
cardinality:
▫  One-to-One:

▫  One-to-Many:

▫  Many-to-Many:

20
Key Terms

•  Data modeling •  Minimum cardinality


•  Entity-relationship (E-R) •  Maximum cardinality
diagram •  One-to-One (1:1) relationship
•  REA data model •  One-to-Many (1:N)
•  Resources relationship
•  Events •  Many-Many (M:N)
•  Agents relationship
•  Cardinalities

21

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