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Chapter 8

REA Modeling

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Outline

• Learning objectives• Purpose and uses• Terminology• Cardinalities• Database design

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Learning objectives

1. Compare and contrast view-driven and event-driven accounting information systems.

2. Use REA modeling to represent an event-driven AIS.

3. Use a REA model to design a relational database for an event-driven AIS.

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Purpose and uses

• PurposeTo describe an event-driven accounting information system

• Uses– Identify the essential Resources, Events and

Agents of the AIS– Establish relationships between them– Design relational databases to implement an

event-driven AIS

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Terminology

• Events (center column)– Three types

• Operating: sell inventory to customers• Information: record inventory sales in the AIS• Decision / management: decide whether to drop a

specific product line– Only strategically significant operating

events appear in a REA model– Determining strategically significant operating

events is a matter of judgment and practice

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Terminology

• Resources (leftmost column)– Items needed to carry out the events– Examples

• Cash• Inventory• Equipment• Employment application

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Terminology

• Agents (rightmost column)– People needed to carry out the events– Examples

• Employees• Vendors• Customers• Stockholders

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Terminology

Inventory Buy inventory

Vendor

Employee

All entities in a REA model are illustrated with rectangles. Resources on the left, events in the middle, agents on the right.

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Cardinalities

• Show relationships between elements of the REA model

• Facilitate creation of database tables

• Three common symbols– 0– 1– *

• An employee might process no purchase orders. (“0”)

• Every order involves exactly one customer. (“1”)

• A single purchase requisition can include multiple inventory items. (“*”)

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Cardinalities

• To create cardinalities

between two

elements of a REA

model, ask four

questions.

• Set 1

a) For each “x,” what is the minimum number of “y?”

b) For each “x,” what is the maximum number of “y?”

• Set 2

a) For each “y,” what is the minimum number of “x?”

b) For each “y,” what is the maximum number of “x?”

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Cardinalities

Inventory Buy inventory

Vendor

Employee

Suppose:

X = inventory

Y = buy inventory

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Cardinalities

• Set 1a) For each inventory item, what is the smallest

number of “buy inventory” transactions?• Hint: minimums are either 0 or 1• Answer: 1

b) For each inventory item, what is the greatest number of “buy inventory” transactions?• Hint: maximums are either 1 or * (many)• Answer: * (many)

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Cardinalities

InventoryBuy inventory

(1,*)

Every inventory item can be bought one to many

times.

Every inventory item participates in one to many “buy

inventory” events.

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Cardinalities

• Set 2a) For each “buy inventory” transaction, what is

the smallest number of inventory items?• Hint: minimums are either 0 or 1• Answer: 1

b) For each “buy inventory” transaction, what is the greatest number of inventory items?• Hint: maximums are either 1 or * (many)• Answer: * (many)

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Cardinalities

InventoryBuy inventory

(1,*)

Every “buy inventory” event includes one to many

inventory items.

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Cardinalities

InventoryBuy inventory

(1,*) (1,*)

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Cardinalities

Buy inventory

Employee(0,*) (1,1)

Every employee participates

in zero to many “buy

inventory” events.

Every “buy inventory”

event involves exactly one

employee.

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Database design

• Every “box” in the REA model needs at least one database table

• When maximum cardinalities are 1 and *, include the key from the “one side” in the table on the “many side.”

• When maximum cardinalities are * and *, create a junction table to express the relationship.

• Follow the rules of normalization.

• Do not store calculated data.

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Database design

Inventory Buy inventory

Vendor

Employee

(1,*) (1,*)

(0,*)

(1,1)

(1,*)

(1,1)

Tables indicated by this REA model:• Vendor• Employee• Inventory• Buy inventory• Inventory / buy inventory

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Database design

• Vendor table– Vendor ID– Vendor name– Vendor address– Vendor city– Vendor state– Vendor ZIP code– Vendor web site– And many others!

• Employee table– Employee ID– Employee last name– Employee first name– Employee department– Employee job title– And many others!

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Database design

• Inventory table– Inventory ID– Inventory item name– Beginning quantity on hand– Beginning inventory cost per unit– Beginning inventory date

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Database design

• Buy inventory table– Purchase order

number– Purchase order date– [Vendor ID]– [Employee ID]

Buy inventory

Vendor(1,*)

(1,1)

Remember: When the maximum cardinalities are “one” and

“many,” put the primary key from the “one side” (vendor)

into the table on the “many side” (buy inventory).

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Database design

• Inventory / buy inventory table– [Inventory ID]– [Purchase order number]– Quantity purchased– Cost per unit purchased

Inventory Buy inventory

(1,*) (1,*)

Remember: When the

maximum cardinalities are

“many” and “many,” create a

junction table.

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