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
Agenda
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REA
Developing a REA Diagram
Implementing an REA Diagram in a
Relational Database
The Purpose of REA
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.
The REA Data Model


1
2
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
Sample REA Diagram
Sales Person
Participates
in
Inventory
Stock flow
Sales
Participates
in
Customer
Economic
Duality
Participate
s
in
Cash
Stock flow
Cashier
Receive Cash
Participates
in
Basic REA Template
Internal
Agent
Participates
in
Resource A
inflow
Get Resource A
Participates
in
External
Economic
Agent
Duality
Participate
s
in
Internal
Agent
Resource B
outflow
Give up Resource B
Participates
in
External
Agent
An AIS Viewed as a Set of Give-to-Get
Exchanges
Give Inventory
Get Cash
Revenue Cycle
Give Cash
Get Inventory
Expenditure Cycle
Give Cash
Give Cash
Get Employee’s
Time/Service
Get Cash
Human Resources/Payroll
Cycle
Production Cycle
Get Employee’s
Time/Service
Give/Use Raw
Materials
Give (Use) Machine
Time & Services
Get Finished
Goods Inventory
Financing Cycle
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:
1 Resources acquired and used by an
organization
2 Events engaged in by the organization
3 Agents participating in these events
Types of Entities


Resources are defined as those
things that have economic value to
the organization.
What are some examples?
– cash
– inventory
– equipment
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
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
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.
Structured Relationships
Resource A
Inflow
Get
resource A
Economic
duality
Resource B
Outflow
Give up
resource B
Structured Relationships
Get
resource A
Participates in
Internal Agent
Participates in
External Agent
Participates in
Internal Agent
Participates in
External Agent
Economic
duality
Give up
resource B
Agenda




REA
Developing a REA Diagram
Implementing an REA Diagram in
a Relational Database
The Purpose of REA
Developing an REA Diagram

1
2
3
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.
Identify Economic
Exchange 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.
Identify Economic
Exchange Events
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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.
Identify Resources and Agents
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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.
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).
Specify Cardinalities
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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.
Specify Cardinalities
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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.
Specify Cardinalities

The minimum cardinality of zero in
the (0, N) cardinality pair to the left of
the customer entity in the customersales relationship indicates that a
given customer need not be linked to
any sales events.
Sales
Made to
(0, N)
Customer
Specify Cardinalities
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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.
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
(1, 1)
Party to
Customer
Specify Cardinalities
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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.
Specify Cardinalities

1
2
3
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
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.
Examples
Sales
)
Sales
(0, 1)
(0, N)
(1, 1)
(1, 1)
Sales
(0, N)
Cash
Receipts
(1, N)
Cash
Receipts
(1, N)
Cash
Receipts
Sales
(0, 1)
Cash
Receipts
Agenda

REA

Developing a REA Diagram

Implementing an REA Diagram in a
Relational Database

The Purpose of REA
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.
Create Tables

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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.
Create Tables
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Inventory
Sales
Salesperson
Customer
Cashier
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Cash collections
Cash
Sales-inventory
Sales-cash
collections
Identify Attributes for Each Table
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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.
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.
Implement One-to-One and
One-to-Many Relationships

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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.
Agenda

REA

Developing a REA Diagram

Implementing an REA Diagram in a
Relational Database

The Purpose of REA
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:
1 Information about the relationships
among data items
2 Information about the organization’s
business practices
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
Inventory
(0, N)
Line items
(1, N)
Sales
Information About Business
Practices

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
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.
Extracting Information
From the AIS
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
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.
Sales
(0, 1)
(1, N)
Cash
collections
Extracting Information
From the AIS
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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.
Topics Discussed
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REA-Introduction
Developing a REA Diagram
Implementing a REA Diagram in a
Relational Database
Review
1.
a.
b.
c.
d.
Which of the following is not
considered a resource in an REA
model?
Cash
Accounts Receivable
Inventory
Equipment
Review
2. Which of the following is not a type
of entity in the REA data model?
a.
Customers
b.
Sales
c.
Invoices
d.
Delivery trucks
Review
3. Which type of relationship
cardinality must be implemented in
a relational database as a separate
table?
a.
One-to-one relationship
b.
One-to-many relationship
c.
Many-to-many relationship
d.
all of the above
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?
a.
One-to-one relationship
b.
one-to-many relationship
c.
many-to-many relationship
d.
paid-in-full relationship
Review
5. The key of a many-to-many
relationship between the sales and
inventory events would be:
a.
invoice number
b.
item number
c.
both invoice number and item
number
d.
either invoice number or item
number
Review
6. Which of the following elements of
the REA data model must be
implemented as tables in a
relational database?
a.
Resources
b.
events
c.
agents
d.
all of the above
Review
7. Which set of cardinality pairs most
accurately models the sales of lowcost, mass-produced items by a
retail store?
a.
inventory(0,N) – (0,N) Sales
b.
inventory(0,N) – (1,N) Sales
c.
Inventory (1,N) – (1,N) Sales
d.
inventory(1,N) – (1,N) Sales
Review
8. A company wants to store
information about both currently
used and alternative suppliers?
a.
Purchases(0,N) – (0,1) suppliers
b.
Purchases(1,N) – (1,1) suppliers
c.
Purchases(0,1) – (1,N) suppliers
d.
Purchases(1,1) – (0,N) suppliers
Example
Draw an REA Diagram , complete cardinalities, for Joe’s
revenue cycle
Joe’s is a small ice cream shop located near the local
university’s baseball field. Joe’s serves walk-in
customers only. The shop carries 26 flavors of ice
cream. Customers can buy cones, sundaes, or shakes.
When a customer pays for an individual purchase, a
sale transaction usually includes just one item. When a
customer pays for a family or a group purchase,
however, a single sale may include many different
items. All sales must be paid for at the time the ice
creams is served.