Technology Review-II

1. Technology Review-II Professor Martin Professor Xiong CSUS This lecture is based primarily on Romney & Steinbart(2003). It also draws on Martin (2002). Updated on: Monday, September 9, 2003

2. Agenda • REA • Developing a REA Diagram • Implementing an REA Diagram in a Relational Database • The Purpose of REA

3. The REA Data Model • Data modeling is the process of defining a database so that it faithfully represents all aspects of the organization, including its interactions with the external environment.

4. The REA Data Model • The REA data model is a conceptual modeling tool specifically designed to provide structure for designing AIS databases. • The REA data model provides structure in two ways: • By identifying what entities should be included in the AIS database • By prescribing how to structure relationships among the entities in the AIS database

5. Sales Person Sample REA Diagram Participates in Stock flow Inventory Sales Participates in Economic Duality Customer Participates in Stock flow Cash Cashier Receive Cash Participates in

6. Internal Agent Basic REA Template Participates in inflow Resource A Get Resource A Participates in External Agent Economic Duality Participates in Internal Agent outflow Resource B Give up Resource B Participates in External Agent

7. Give Inventory Get Cash An AIS Viewed as a Set of Give-to-Get Exchanges Revenue Cycle Give Cash Get Inventory Expenditure Cycle Give Cash Get Employee’s Time/Service Human Resources/Payroll Cycle Give Cash Production Cycle Get Cash Get Employee’s Time/Service Financing Cycle Get Finished Goods Inventory Give/Use Raw Materials Give (Use) Machine Time & Services

8. Types of Entities • An entity is any class of objects about which data is collected. • The REA data model classifies entities into three distinct categories: • Resources acquired and used by an organization • Events engaged in by the organization • Agents participating in these events

9. Types of Entities • Resources are defined as those things that have economic value to the organization. • What are some examples? • cash • inventory • equipment

10. Types of Entities • Events are the various business activities about which management wants to collect information for planning or control purposes. • What are some examples? • sales events • taking customer orders

11. Types of Entities • Agents are the third type of entity in the REA model. • Agents are the people and organizations that participate in events and about whom information is desired. • What are some examples? • employees • customers

12. Structured Relationships • The REA data model prescribes a basic pattern for how the three types of entities (resources, events, and agents) should relate to one another.

13. Inflow Economic duality Outflow Structured Relationships Resource A Get resource A Resource B Give up resource B

14. Participates in Participates in Economic duality Participates in Participates in Structured Relationships Internal Agent Get resource A External Agent Internal Agent Give up resource B External Agent

15. Agenda • REA • Developing a REA Diagram • Implementing an REA Diagram in a Relational Database • The Purpose of REA

16. Developing an REA Diagram • Developing an REA diagram for a specific transaction cycle consists of three steps: • Identify the pair of events that reflect the basic economic exchange. • Identify the resources affected by each event and the agents who participate in those events. • Determine the cardinalities of each relationship.

17. Identify EconomicExchange Events • The basic economic exchange in the revenue cycle involves the sale of goods or services and the subsequent receipt of cash in payment for those sales. • The REA diagram for S&S’s revenue cycle shows the drawing of sales and cash collections events entities as rectangles and the relationship between them as a diamond.

18. Identify EconomicExchange Events • In drawing an REA diagram for an individual cycle, it is useful to divide the paper into three columns, one for each type of entity. • Left column should be used for resources. • Middle column should be used for events. • Right column should be used for agents.

19. Identify Resources and Agents • Once the events of interest have been specified, the resources that are affected by those events need to be identified. • The sales event involves the disposal of inventory. • The cash collections event involves the acquisition of cash.

20. Identify Resources and Agents • After specifying the resources affected by each event, the next step is to identify the agents who participate in those events. • There will always be at least one internal agent (employee) and, in most cases, an external agent (customer).

21. Specify Cardinalities • The cardinality of a relationship indicates how many occurrences of one entity in the relationship can be linked to a single occurrence of the other entity in the relationship. • Cardinalities are often expressed as a pair of numbers. • The first number is the minimum, and the second number is the maximum.

22. Specify Cardinalities • The minimum cardinality of a relationship indicates the fewest number of rows that can be involved in that relationship. • Minimum cardinalities can be either 0 or 1. • A minimum cardinality of zero means that each occurrence of the entity on the other side of the relationship need not be linked to any occurrences of the entity on this side of the relationship.

23. Made to Specify Cardinalities • The minimum cardinality of zero in the (0, N) cardinality pair to the left of the customer entity in the customer-sales relationship indicates that a given customer need not be linked to any sales events. Sales (0, N) Customer

24. Specify Cardinalities • Minimum cardinalities of zero are common for relationships between two temporarily linked events. Why? • Because at any given time the second event in the pair may not yet have occurred. • A minimum cardinality of 1 indicates that each instance of that entity must be associated with at least one instance of the other entity.

25. Party to Specify Cardinalities • The minimum cardinality below the sales entity in the sales-customer relationship reflects the general business rule that each sales event must be associated with some specific customer. Sales Customer (1, 1)

26. Specify Cardinalities • The maximum cardinality of a relationship indicates the largest number of rows that can be involved in that relationship. • Maximum cardinalities can be either 1 or N. • The N indicates that each row in the table may be linked to many rows in the other table.

27. Specify Cardinalities • Three basic types of relationships between entities are possible, depending on the maximum cardinality associated with each entity. • One-to-one relationship • One-to-many relationship • Many-to-many relationship

28. Specify Cardinalities • Cardinalities are not arbitrarily chosen by the database designer. • They reflect facts about the organization being modeled and its business practices obtained during the requirements analysis stage of the database design process.

29. Examples Cash Receipts Sales ) (0, 1) (1, 1) Sales Cash Receipts (1, 1) (0, N) Sales Cash Receipts (0, 1) (1, N) Sales Cash Receipts (0, N) (1, N)

30. Agenda • REA • Developing a REA Diagram • Implementing an REA Diagram in a Relational Database • The Purpose of REA

31. Implementing an REA Diagram in a Relational Database • An REA diagram can be used to design a well-structured relational database. • A well-structured relational database is one that is not subject to update, insert, and delete anomaly problems.

32. Create Tables • A properly normalized relational database has a table for each entity and each many-to-many relationship. • From the previously discussed REA diagram, nine tables would be created: one for each of the seven entities and one for each of the many-to-many relationships.

33. Inventory Sales Salesperson Customer Cashier Cash collections Cash Sales-inventory Sales-cash collections Create Tables

34. Identify Attributes for Each Table • Primary keys: • Usually, the primary key of a table representing an entity is a single attribute. • Other Attributes: • Additional attributes are included in each table to satisfy transaction processing requirements.

35. Implement One-to-One and One-to-Many Relationships • One-to-One Relationships: • In a relational database, one-to-one relationships between entities can be implemented by including the primary key of one entity as a foreign key in the table representing the other entity.

36. Implement One-to-One and One-to-Many Relationships • One-to-Many Relationships: • In a relational database, one-to-many relationships can be also implemented in relation to databases by means of foreign keys.

37. Agenda • REA • Developing a REA Diagram • Implementing an REA Diagram in a Relational Database • The Purpose of REA

38. Documentation • REA diagrams are especially useful for documenting an advanced AIS built using databases. • REA diagrams provide two important types of information about a database: • Information about the relationships among data items • Information about the organization’s business practices

39. Line items Information About Business Practices • The cardinalities in REA diagrams provide useful information about the nature of the company being modeled and the business policies that it follows. Events Resources Sales Inventory (0, N) (1, N)

40. Information About Business Practices • The relationship between sales and inventory is called line items and represents the fact that each sale consists of one or more items of merchandise. • Each item appears as a separate line item on the sales invoice. • The quantity sold indicates that a customer may buy more than one of a given item.

41. Extracting InformationFrom the AIS • A complete REA diagram serves as a useful guide for querying an AIS database. • Queries can be used to generate journals and ledgers from a relational database built on the REA model. (0, 1) (1, N) Sales Cash collections

42. Extracting InformationFrom the AIS • In a one-to-many relationship between cash collection and sales, remittance number is a foreign key in the sales table. • Each sales transaction is paid in full by a cash collection event. • What is the query logic? • Total accounts receivable is the sum of all sales for which there is no remittance number.

43. Topics Discussed • REA-Introduction • Developing a REA Diagram • Implementing a REA Diagram in a Relational Database

44. Review • Which of the following is not considered a resource in an REA model? • Cash • Accounts Receivable • Inventory • Equipment

45. Review 2. Which of the following is not a type of entity in the REA data model? • Customers • Sales • Invoices • Delivery trucks

46. Review 3. Which type of relationship cardinality must be implemented in a relational database as a separate table? • One-to-one relationship • One-to-many relationship • Many-to-many relationship • all of the above

47. Review 4. In a company pays for each purchase it makes with a separate check and does not make installment payments on any purchases, then the relationship between cash disbursement and purchases would be modeled as being with of the following? • One-to-one relationship • one-to-many relationship • many-to-many relationship • paid-in-full relationship

48. Review 5. The key of a many-to-many relationship between the sales and inventory events would be: • invoice number • item number • both invoice number and item number • either invoice number or item number

49. Review 6. Which of the following elements of the REA data model must be implemented as tables in a relational database? • Resources • events • agents • all of the above

50. Review 7. Which set of cardinality pairs most accurately models the sales of low-cost, mass-produced items by a retail store? • inventory(0,N) – (0,N) Sales • inventory(0,N) – (1,N) Sales • Inventory (1,N) – (1,N) Sales • inventory(1,N) – (1,N) Sales