1

The Accounting REA Model

as an Information Engineering

Interaction Model

Slides 5

2

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

3

Analysis Tasks with REA Interaction Modeling

SystemsDesign

Planning

ActivityAnalysis

PreliminaryInteraction Analysis 1

FormalInteractionAnalysis 2

PLD, ELC

AHD, ADD

REA

Data Analysis

ERD

4

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.

5

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

7

Activity Model: Business Function Decomposition

8

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

9

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

10

• 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.

14

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

19

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