The Accounting REA Model

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Slides 5
The Accounting REA Model as an Information
Engineering Interaction Model
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Review of Modeling

• A model is a representation of reality
• Systems analysts seek to understand an
  organization by building a representation of the
  business and its workings, called a business
  model (also conceptual or logical model)
• An IE business model includes three primary types
  of models (1) data models, (2) activity models,
  and (3) interaction models

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Analysis Tasks with REA Interaction Modeling
AHD, ADD
Activity Analysis
REA
Preliminary Interaction Analysis 1
PLD, ELC
ERD
Formal Interaction Analysis 2
Systems Design Planning
Data Analysis
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Types of Models

• Activity models Record the activities of
  interest to the business (i.e., the things the
  business does or should do).
• Involves decomposition of business processes from
  the highest level (AMP of Resources, Conversion
  Processes, MSC Processes) to the lowest
  (elementary processes) - template
• Also involves the specification of process
  dependency events, to refine decomposition of the
  processes.

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Activity Models Template for Decomposition of
Business Processes (IPSO) - REPEAT
Adds value
RBMS
Source Hollander, Denna Cherrington (2000),
adapted
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Business Processes
AMP Processes
Conversion Processes
MSCProcesses
Human Resources Financial Resources Supplies Inven
tories Property, Plant and Equipment
Operations Varies widely depending upon the
industry
Marketing Sales Collection and Credit
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Activity Model Business Function Decomposition
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Types of Models

• Interaction models Define how things the
  business does (activities/events) affect things
  of interest to the business (data)
• The REA model is an interaction model
• We have combined the IE notation of an
  interaction model with the accounting REA(L) model

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Source Hollander, Denna Cherrington, 1996
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• REAL modeling is an aid in analyzing an
  organization and its activities (helps develop
  activity models by identifying lowest level of
  decomposition)
• Helps decide what data to collect (helps develop
  data models)
• Enhances your ability to evaluate business
  processes and identify processes and events that
  are not valuable, not competitive, and/or not
  meeting the objectives of the organization

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Process and Events
Take customer order
Ship goods
Business Process Simple MS
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REA Template With Two Events
Internal Agent
Location
Event 1 Take customer order
External Agent
Resource
Internal Agent
Location
Event 2 Ship goods
External Agent
Resource
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Validate The REAL Model With Business
Persons

• Those who understand the details and objectives
  of the business process and events being modeled
  should perform the validation.
• Validation sessions should result in either the
  confirmation of the models accuracy or
  modification of the model.

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Relationships

• Data modeling term that indicates an association
  between tables How the things of significance
  are related (A FK must match to an existing PK,
  or else be NULL)
• This controlled redundancy allows linking of
  tables (hence relational)
• Entity-Relationship Diagram (ERD) A data model
  (at the conceptual level) that shows the
  relationships enforcing business rules between
  entities (tables) in a database environment

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Connectivity or Cardinality

• One-to-One (PK ---gt PK) - Generally indicates
  that your data model has two entity types that
  can be collapsed into one
• One-to-Many (PK ---gt FK) - Most common
• Many-to-Many (FK ---gt FK) - Not enforceable by
  RDMS generally indicates that a modeling error
  has occurred - this type of relationship means
  that your model is missing an entity type

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Cardinality of Relationships

• Mandatory - an instance of an entity in one table
  does require a associated record in another table
  (as defined by a relationship)
• Optional - an instance of an entity in one table
  does not require a associated record in a another
  table (as defined by a relationship)

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Different Notations to Represent Relationships
Cardinalities (could even be on opposite sides of
the connecting line a mirror image) - handout
(1,1)
(1,N)
(0,1)
(0,N)
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Events

• Most events are easy to identify because the
  business records data on forms or files.
• Events are characterized by the fact that they
  happen or have duration
• For activity and REAL models, they are
  characterized by at least a verb and a noun, but
  could have an adjective, take customer order,
  deliver customer order, pay supplier
• For data models (converting REAL to ERD), they
  are characterized by a noun, e.g., Order header,
  Order detail, Sales header, Sales detail, Cash
  receipt

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A REAL Interaction Model for MSC Function
Note Use of verb/noun
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Surrounding RALs

• AGENTS
• Entity types that describe roles played in a
  system. They usually represent people or
  organizations.
• APPLICANT, BORROWER, CLIENT, CREDITOR, EMPLOYEE,
  EMPLOYER, INSTRUCTOR, MANAGER, SALESPERSON, VENDOR

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Surrounding RALS

• RESOURCES
• Entity types that describe tangible things.
• EQUIPMENT, INVENTORY, CASH, MACHINE, MATERIAL,
  PART, PRODUCT, VEHICLE, but they can also be
  Informational Resources, e.g., PRODUCT CATALOG

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Surrounding RALs

• LOCATIONS
• Entity types that describe locations
• BRANCH, BUILDING, CAMPUS, CITY, COUNTRY, COUNTY,
  SALES REGION, WAREHOUSE, STORE, FRANCHISEE

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Data model ERD with Normalization