2. 1 The Accounting REA Model as an Information Engineering Interaction Model Slides 5

3. 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

4. 3 Analysis Tasks with REA Interaction Modeling Systems Design Planning Activity Analysis Preliminary Interaction Analysis 1 Formal Interaction Analysis 2 PLD, ELC AHD, ADD REA Data Analysis ERD

5. 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.

6. 5 HEART OF ORGANIZATION Conversio n Processes Customers Finished Goods and Services to Customers MSC Processes Supply goods and services Receive payment Activity Models: Template for Decomposition of Business Processes (IPSO) - REPEAT Suppliers AMP Processes Input Resources to the Organization Request input resources Pay for input resources Adds value RBMS Source: Hollander, Denna & Cherrington (2000), adapted

7. 6 Business Processes AMP Processes Human Resources Financial Resources Supplies Inventories Property, Plant and Equipment Conversion Processes Operations Varies widely depending upon the industry MSC Processes Marketing Sales Collection and Credit

8. 7 Activity Model: Business Function Decomposition

9. 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

10. 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 Resource External Agent Location Source: Hollander, Denna & Cherrington, 1996

11. 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

12. 11 Business Process: Simple MS Process and Events Ship goods Take customer order

13. 12 REA Template With Two Events Resource Internal Agent External Agent External Agent Location Event 1: Take customer order Internal Agent Resource Event 2: Ship goods Event 2: Ship goods Location External Agent External Agent

14. 13 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.

15. 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

16. 15 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

17. 16 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)

18. 17 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)

19. 18 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

20. 19 A REAL Interaction Model for MSC Function Sell Goods Customer Inventory Salesperson Department Receive Payment Cashier Cash Store Note: Use of verb/noun

21. 20 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

22. 21 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

23. 22 Surrounding RALs LOCATIONS Entity types that describe locations BRANCH, BUILDING, CAMPUS, CITY, COUNTRY, COUNTY, SALES REGION, WAREHOUSE, STORE, FRANCHISEE

24. 23 Data model: ERD with Normalization