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:
1
RESOURCES
2
EVENTS
3
AGENTS
RESOURCES
•
Resources have economic value to the organization.
•
What are some examples?
AGENTS
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Agents are the people and organizations
•
What are some examples?
EVENTS
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Events are the business activities
•
What are some examples?
Developing an REA Diagram
Four steps:
1.
Identify the pair of events
2.
Identify the resources affected by each event and the agents
3.
Analyze each economic exchange event to determine whether it should be
decomposed
4.
Determine the cardinalities of each relationship.
Basic REA Diagram
Resource A
Inflow
GET Resource A
Participant
Participant
Internal Agent
External Agent
Economic
Duality
Resource B
Outflow
GIVE Resource B
Participant
External Agent
Participant
Internal Agent
Step 1: Identify Economic Exchange Events
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Useful to divide the paper into three columns
•
Left column should be used for resources.
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Middle column should be used for events.
•
Right column should be used for agents.
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The basic economic exchange in the revenue cycle
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Draw sales and cash receipts events entities as rectangles
•
Relationship between them as a diamond.
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
•
Identify the agents who participate in those events.
•
There will always be at least one internal agent
•
And in most cases, an external agent
Step 3: Include Commitment Events
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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”
Decomposing Sales into Orders and Sales
Customer
Orders
InventoryOrders
Participant
Customer
Participant
Inventory
Leads to
Salesperson
InventorySales
Participant
Sales
Participant
Customer
Step 4: Determining Cardinalities
•
Cardinalities indicate
•
•
Expressed as a pair of numbers.
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First number
•
•
Second number
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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
•
The minimum cardinality of zero in the (0, N) cardinality
pair
Sales
(0, N)
Made to
Customer
•
The minimum cardinality of 1 in the (1, 1) cardinality pair
Sales
(0, N)
Made to
(1,1)
Customer
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
•
The maximum cardinality of N in the (0, N) cardinality
pair
Sales
(0, N)
Made to
Customer
•
The maximum cardinality of 1 in the (1, 1) cardinality pair
Sales
•
(0, N)
Made to
(1,1)
Customer
Cardinalities are not arbitrarily chosen by the database
designer.
Relationships between Entities
•
1.
2.
3.
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)
A one-to-one relationship
Sales
1
1
Cash
Receipts
A one-to-many relationship
Sales
N
1
Cash
Receipts
A one-to-many relationship
Example 2
Sales
1
N
Cash
Receipts
A many-to-many relationship
M
Sales
N
Cash
Receipts
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
Sample ERD using the REA Model
(1,N)
(0,N)
InventoryPurchases
Inventory
Purchases
(0,N)
(1,1)
Participant
Buyer
(Purchasing Agent)
(0,N)
(1,N)
Participant
(1,1)
Vendor
P/D
(0,N)
Participant
(1,1)
(0,N)
(1,1)
Cash
(0,N)
Stockflow
(0,N)
Cash
Disbursement
Participant
(1,1)
Cashier
Implementing the REA Diagram
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An REA diagram can be used to design a wellstructured relational database.
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Create the schema from the REA diagram.
•
What is a well designed relational database?
Implementing the REA Diagram, continued
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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
•
The REA Model
(1,N)
(0,N)
InventoryPurchases
Inventory
Purchases
(0,N)
(1,1)
Participant
Buyer
(Purchasing Agent)
(0,N)
(1,N)
Participant
(1,1)
Vendor
P/D
(0,N)
Participant
(1,1)
(0,N)
(1,1)
Cash
(0,N)
Stockflow
(0,N)
Cash
Disbursement
Participant
(1,1)
Cashier
Create the Tables
•
From the previously discussed REA diagram, nine tables
would be created
Assign Attributes
•
Primary keys:
•
Other Attributes:
Implement the 1:1 and 1:M Relationships
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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