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The REA Model

The REA Model. The REA Model. The REA model provides structure for developing an accounting database It helps to identify It helps to. Types of Entities. What is an entity? Three distinct types: RESOURCES EVENTS AGENTS. RESOURCES. Resources have economic value to the organization.

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The REA Model

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  1. The REA Model

  2. The REA Model The REA model provides structure for developing an accounting database • It helps to identify • It helps to

  3. Types of Entities What is an entity? Three distinct types: • RESOURCES • EVENTS • AGENTS

  4. RESOURCES • Resources have economic value to the organization. • What are some examples? AGENTS • Agents are the people and organizations • What are some examples?

  5. EVENTS • Events are the business activities • What are some examples?

  6. Developing an REA Diagram Four steps: • Identify the pair of events • Identify the resources affected by each event and the agents • Analyze each economic exchange event to determine whether it should be decomposed • Determine the cardinalities of each relationship.

  7. Resource A GET Resource A Internal Agent Inflow Participant External Agent Participant Economic Duality External Agent Participant Resource B GIVE Resource B Internal Agent Outflow Participant Basic REA Diagram

  8. Step 1: Identify Economic Exchange Events • Useful to divide the paper into three columns • Left column should be used for resources. • Middle column should be used for events. • Right column should be used for agents.

  9. The basic economic exchange in the revenue cycle • Draw sales and cash receipts events entities as rectangles • Relationship between them as a diamond.

  10. Step 2: Identify Resources and Agents • The sales event involves the disposal of the resource • The cash receipts event involves the acquisition of the resource

  11. Identify the agents who participate in those events. • There will always be at least one internal agent • And in most cases, an external agent

  12. Step 3: Include Commitment Events • Can each economic exchange event be decomposed into a combination of one or more commitment exchange events. • Example: • The sales event may be decomposed into the “take order” • And “deliver order”

  13. Customer Customer Orders Inventory- Orders Participant Participant Inventory Salesperson Leads to Inventory- Sales Participant Sales Customer Participant Decomposing Sales into Orders and Sales

  14. Step 4: Determining Cardinalities • Cardinalities indicate • Expressed as a pair of numbers. • First number • Second number

  15. Minimum Cardinality • The minimum cardinality of a relationship • Minimum cardinalities can be either 0 or 1. • A minimum cardinality of zero • A minimum cardinality of 1

  16. Sales (0, N) Customer Made to • The minimum cardinality of zero in the (0, N) cardinality pair

  17. Sales (0, N) (1,1) Customer Made to • The minimum cardinality of 1 in the (1, 1) cardinality pair • The minimum cardinality of 1 in the (1, 1) cardinality pair

  18. Maximum Cardinality • The maximum cardinality of a relationship • Maximum cardinalities can be either 1 or N. • A minimum cardinality of 1 • A maximum cardinality of N

  19. (0, N) Sales Customer Made to • The maximum cardinality of N in the (0, N) cardinality pair

  20. (0, N) (1,1) Sales Customer Made to • The maximum cardinality of 1 in the (1, 1) cardinality pair • Cardinalities are not arbitrarily chosen by the database designer.

  21. Relationships between Entities • Three basic types of relationships • A one-to-one relationship (1:1) • A one-to-many relationship (1:N) • A many-to-many relationship (M:N)

  22. Sales Cash Receipts 1 1 A one-to-one relationship

  23. Sales Cash Receipts N 1 A one-to-many relationship

  24. Sales Cash Receipts 1 N A one-to-many relationship Example 2

  25. Sales Cash Receipts M N A many-to-many relationship

  26. ER Diagrams using the REA Model • An Entity-Relationship (E-R) diagram is a common method for portraying a database schema. • An E-R diagram shows • Entities are represented by • Relationships between entities

  27. Inventory Purchases Buyer (Purchasing Agent) (1,N) (0,N) (0,N) (1,1) Participant (0,N) (1,N) (1,1) Participant Vendor P/D (0,N) (1,1) (0,N) Cash Cash Disbursement Cashier (1,1) (0,N) (0,N) (1,1) Sample ERD using the REA Model Inventory- Purchases Participant Stockflow Participant

  28. Implementing the REA Diagram • An REA diagram can be used to design a well-structured relational database. • Create the schema from the REA diagram. • What is a well designed relational database?

  29. Implementing the REA Diagram, continued • Implementing an REA diagram in a relational database is a three-step process: • Create a table • Assign attributes to appropriate tables • Use foreign keys to implement

  30. Inventory Purchases Buyer (Purchasing Agent) (1,N) (0,N) (0,N) (1,1) Participant (0,N) (1,N) (1,1) Participant Vendor P/D (0,N) (1,1) (0,N) Cash Cash Disbursement Cashier (1,1) (0,N) (0,N) (1,1) The REA Model Inventory- Purchases Participant Stockflow Participant

  31. Create the Tables • From the previously discussed REA diagram, nine tables would be created Assign Attributes • Primary keys: • Other Attributes:

  32. Implement the 1:1 and 1:M Relationships • FOREIGN KEYS • One-to-One Relationships: • One-to-Many Relationships: • The primary key of the entity with the maximum cardinality of N becomes a foreign key in the entity with a maximum cardinality of 1

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