Course: ISYS6186-Business Process Fundamental

Effective Period : September 2018

Database Design Using

the REA Data Model and
Special Topics in REA Modeling

Session 3-4
 Acknowledgement

These slides have been adapted from:

Accounting Information Systems

14th (2018)
Marshall B. Romney, Paul John Steinbart
Pearson Education Limited, England
ISBN: 978-1-292-22008-6

Chapter 17-18-19
 Learning Outcome

Student will able to :

• Describe the model of business process
• Construct an integrated business process
 Learning Objectives

After studying this chapter, student will

able to :
• Discuss the steps for designing and implementing a
database system.
• Explain the nature and use of Entity-Relationship (E-R)
diagrams.
• Explain the content and purpose of the REA data
model.
• Read an REA diagram and explain what it reveals about
the business activities and policies of the organization
being modeled.
 Database
Design Process
 Data Modeling
• Process of defining a database so that it faithfully
represents all aspects of the organization, including its
interactions with the external environment.
– Entity-relationship (E-R) diagrams
– REA data model
 Entity-Relationship Diagrams
• Entity-Relationship (E-R) diagrams are a graphical way to
diagram the relationships between entities
• An entity is anything that the organization wants to collect
and store information
• For AIS database design, the decision is understanding
what entities should be included.
• REA diagrams are E-R diagrams specifically designed for
AIS.
 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)
 REA Basic Template

Structuring Relationship:
The Basic REA Template
1. Each event is linked to at least one
resource that is affects.
2. Each event is linked to at least one
other event.
3. Each event is linked to at least two
participating agents.
REA Basic Template
 REA
Basic Template
 Creating an REA Model
• Identify relevant events
– Give-get exchange (economic duality)
• Identify resources and agents
– Resource reduced in give event
– Resource acquired in get event
• Determine cardinalities of relationships
– Nature of the relationship between the two entities
 Cardinality Notation Methods
• Graphical symbols
– Graphical symbols represent minimum–maximum
cardinalities
• (Min, Max) notation
– Pairs representing the minimum–maximum cardinalities
• UML notation
– Pairs representing the minimum–maximum cardinalities
• Maximums only (Microsoft Access)
Three Types
Of Relationships:
1. A one-to-one (1:1)
relationship
2. A one-to-many (1:N)
relationship
3. A many-to-many (M:N)
relationship

Figure 17-7
Examples of Different
Types of Relationships
 Key Terms

• Data modeling • Minimum cardinality

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

After studying this chapter, student will

able to :
• Integrate separate REA diagrams for individual
business cycles into a single, comprehensive,
organization-wide REA diagram.
• Build a set of tables to implement an REA model of an
AIS in a relational database.
• Use the REA data model to write queries to retrieve
information from an AIS relational database built
according to the REA data model.
 Combining REA Diagrams
• Individual REA diagrams can be combined to form an
integrated REA diagram by:
– Merging redundant resource entities (e.g., inventory is
acquired in expenditure cycle and reduced in the sales
cycle)
– Merging redundant event entities (e.g., disburse cash
event appears in the expenditure cycle and the payroll
cycle)
 Integrated REA Diagram Rules

• Every event must be linked to at least one resource.

• Every event must be linked to two agents who participate in
that event.
• Every event that involves the disposition of a resource must
be linked to an event that involves the acquisition of a
resource (give-get exchange).
• Every resource must be linked to at least one event that
increments that resource and to at least one event that
decrements that resource.
• If event A can be linked to more than one other event, but
cannot be linked simultaneously to all of those other events,
then the REA diagram should show that event A is linked to a
minimum of 0 of each of the other events.
• If an event can be linked to any one of a set of agents, then
the ERA diagram should show that event is linked to a
minimum of 0 of each of those agents.
Figure 18-1
Fred’s Train Shop
Revenue Cycle
Figure 18-2
Fred’s Train Shop
Expenditure Cycle
Figure 18-3
Fred’s Train Shop
Payroll Cycle
 Figure 18-4
Integrated REA
Diagram for Fred’s
Train Shop
 Using an REA Diagram
to Build a Relational Database
• Create tables for each distinct entity and M:N relationship
• Assign attributes to each table
– Identify primary keys
– Concatenated keys for M:N relationship table
• Use foreign keys to implement 1:1 and 1:N relationships
 Table 18-1
Table Names and
Attribute Placement
for Figure 18-4
 Using REA Diagrams
to Retrieve Information
• Journals
– Information contained in event tables
• Ledgers
– Information contained in resource tables (increment and
decrements of events)
• Financial statements
– Information contained in resources and events using a
set of queries
• Management reports
– Financial and nonfinancial information
 Key Term
• Concatenated keys
 Learning Objectives

After studying this chapter, student will

able to :
• Create REA data models for the revenue and expenditure cycles
of other types of organizations besides retail stores.
• Extend REA diagrams to include information about employee
roles, M:N agent-event relationships, locations, and
relationships between resources and agents.
• Understand and create an REA diagram for the production
cycle.
• Understand and create an REA diagram for the HR/payroll
cycle.
• Understand and create an REA diagram for the financing cycle.
 REA Extensions
• Additional revenue events
– Call on customer
– Take customer order
– Fill customer order
• Additional expenditure events
– Request inventory
• Employee Roles
– Include as an attribute in the employee table
• Locations
– Modeled with resources (e.g., warehouse)
Figure 19-1
Extended Partial
Revenue Cycle REA
Diagram
Figure 19-2
Extended REA
Diagram for
Expenditure Cycle
REA Extensions:
Sales of Services
REA Extensions:
Acquired Services
 REA Extensions:
Rental Transactions
 Additional REA Elements
• Employee Roles
• Agent-Event Relationships
• Locations
• Resource-Agent Relationship
REA Extensions:
Production Cycle
REA Extensions:
HR/Payroll
 REA Extensions:
Financing Activities
 Integrated,
Enterprise-Wide REA Diagram
Continued to session 5-6

Thank you