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The Accounting REA Model
as an Information Engineering
Interaction Model
Slides 5
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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
SystemsDesign
Planning
ActivityAnalysis
PreliminaryInteraction Analysis 1
FormalInteractionAnalysis 2
PLD, ELC
AHD, ADD
REA
Data Analysis
ERD
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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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HEART OF ORGANIZATION
Conversion
Processes
Customers
Finished Goods and Services to Customers
MSCProcesses
Supply goods and services
Receive payment
Activity Models: Template for Decomposition of Business Processes
(IPSO) - REPEAT
Suppliers
AMP Processes
Input Resources to
the Organization
Requestinput
resources
Pay for inputresources
Adds value
RBMSSource: Hollander, Denna & Cherrington (2000), adapted
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Business Processes
AMP Processes
Human ResourcesFinancial ResourcesSuppliesInventoriesProperty, Plant and Equipment
Conversion Processes
Operations
Varies widely depending upon the industry
MSCProcesses
MarketingSalesCollection 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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REAL Model of A Business Event:The Event and Surrounding RALs
• What happened?
• When did it happen?
• Who was involved?
• What resources were involved?
• Where did it occur?
Event
Internal Agent
ResourceExternalAgent
Location
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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Business Process: Simple MS
Process and Events
Ship goodsTake customer order
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REA Template With Two Events
ResourceResource
Internal Agent
Internal Agent
ExternalAgent
ExternalAgent
LocationLocationEvent 1:
Take customer
order
Event 1: Take
customer order
Internal Agent
Internal Agent
ResourceResource
Event 2:Ship
goods
Event 2:Ship
goods
LocationLocation
External Agent
External Agent
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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 model’s 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 ---> PK) - Generally indicates that your data model has two entity types that can be collapsed into one
•One-to-Many (PK ---> FK) - Most common
•Many-to-Many (FK ---> 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
Sell Goods
CustomerInventory
SalespersonDepartment
Receive Payment
CashierCash
Store
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