CHAPTER 10: not value chain activities and need not

The REA Approach to Database Modeling be modeled. Capturing transaction data

in sufficient detail adequately serves
REVIEW QUESTIONS traditional accounting requirements.
1. What is a user view? 12. Define association.
●​ A user view is the set of data that a ●​ Association is the nature of the
particular user needs to achieve his or relationship between two entities and is
her assigned tasks. represented by the labeled line
connecting them.
2. What is a semantic data model?
●​ It is frameworks for designing 13. Define cardinality.
accounting information systems that ●​ Cardinality describes the number of
captures the operational meaning of the possible occurrences in one entity that
user's data and provides a concise are associated with a single occurrence
description of it in a related entity.
3. What is an REA diagram? 14. Name the four basic forms of
●​ It is a unique version of an ER diagram cardinality.
consisting of three entity types ●​ The four basic forms of cardinality are:
(resources, events, and agents) and a zero or one (0,1), one and only one
set of associations linking them. (1,1), zero or many (0,M), and one or
many (1,M).
4. What are economic resources?
●​ Economic resources are those things of 15. What is view integration?
economic value that are both scarce ●​ It is the process of combining multiple
and under the control of the enterprise. individual REA diagram into an
integrated global or enterprise model.
5. What are economic events?
●​ Economic events are phenomena that 16. List the steps involved in view
affect changes (increase or decrease) in integration.
resources. ●​ The steps involved in view integration.
○​ 1. Consolidate the individual
6. What are support events? models
●​ Support events include control, ○​ 2. Define primary keys, foreign
planning, and management activities keys, and attributes
that are related to economic events, but ○​ 3. Construct Physical database
do not directly affect a change in and Produce User Views
resources.
17. What is the rule for assigning foreign
7. What are economic agents? keys in a 1:1 association?
●​ Economic agents are individuals and ●​ Typically one of the tables in a 1:1
departments that participate in an association has a minimum cardinality
economic event. They are parties both of zero. When this is the case, the
inside and outside the organization primary key of the table with the (1,1)
with discretionary power to use or cardinality should be embedded as a
dispose of economic resources. foreign key in the table with the (0,1)
cardinality.
8. Define duality.
●​ Each economic event in an exchange is 18. What is the rule for assigning foreign
mirrored by an associated economic keys in a 1:M association?
event in the opposite direction. ●​ The primary key of the 1 side table is
embedded as a foreign key in the table
9. What is view modeling? of the M side.
●​ View modeling is a process in which the
database designer identifies and models 19. What is the rule for assigning foreign
the set of data that individual users keys in an M:M association?
need. The result of this process is an ●​ Tables in an M:M association cannot
ER diagram depicting the users data accept an embedded foreign key from
model. the related table. Instead, a separate
link table must be created to contain
10. What is represented by the labeled lines the foreign keys.
connecting entities in an REA diagram?
●​ The labeled line represents the 20. Define the value chain.
association or nature of the relationship ●​ These are the activities that add value
between entities. or usefulness to an organization's
products and services.
11. Why are journals and ledgers not
modeled in an REA diagram?
●​ Traditional accounting activities such
as recording a sale in the journal and
setting up an account receivable are
 are not essential elements of an
DISCUSSION QUESTIONS accounting database. REA systems
capture the essence of what
1. From the perspective of an organization, accountants account for by modeling
explain duality as it relates to the give and the underlying economic phenomena
receive events of an economic exchange directly. Organizations employing REA
●​ An economic exchange is a pair of can thus produce financial statements,
mirrored economic events: the give journals.
event and receive event. From the
perspective of the organization function 7. Distinguish between economic events
being modeled, the give half of the and support events and provide examples
exchange decreases the economic of each.
resource, as represented by the outflow ●​ Economic events are phenomena that
association. The receive half of the affect changes (increase or decrease) in
exchange increases the economic resources. Examples include sales of
resources represented by an inflow products to customers, receipt of cash
association. from customers, and purchases of raw
material from vendors. Support events
2. Explain the relationship between include control, planning, and
cardinality and association. management activities that are related
●​ The upper cardinalities for each of the to economic events, but do not directly
two related entities define the overall affect a change in resources. Examples
association between them. For example, of support events include: 1)
if the cardinality at one end of the determining inventory availability for a
association line is (0,1) and at the other customer prior to a sale, 2) verifying
end it is (1,M) then the association supporting information (performing a
between them is one-to-many (1:M). three-way- match) prior to disbursing
cash to a vendor, and 3) checking
3. Discuss the rules for assigning primary customer credit. before processing a
keys to database tables. sale.
●​ The database designer should select a
primary key that logically and uniquely 8. Describe the minimum number and
defines the nonkey attributes in the types of events that an REA diagram must
table. In some cases this is include.
accomplished with a simple sequential ●​ An REA model must, as a minimum,
code such as an Invoice Number, Check include the two economic events that
Number, or Purchase Order number. In constitute the give and receive activities
other situations block codes, group that reduce and increase economic
codes, alphabetic codes, and mnemonic resources in the exchange. In addition
codes, are better choices. it may include support events, which do
not change resources directly.
4. Discuss the rules for linking events to
resources and agents in an REA diagram. 9. Why are traditional accounting events
●​ Each event must be linked to at least such as recording a transaction in a journal
one resource and a least two agents. or posting to ledgers not modeled in REA
One of the agents is internal to the diagrams?
organization and the other is usually ●​ REA is modeling focuses on value chain
external. In some types of transaction, activities: those that use cash to obtain
however, the second agent may also be resources such as equipment,
internal. materials, and labor and those that
employ these resources to earn new
5. How are external and internal agents revenues. Traditional accounting events
modeled in REA diagrams for transactions such as recording a sale in the journal
that involve purely internal exchanges, and setting up an account receivable
such as raw material moving into are not value chain activities and need
production? not be modeled. Capturing transaction
●​ The convention in an REA diagram is to data in sufficient detail adequately
treat such transactions as if they are serves traditional accounting
sales. The clerk giving up control and requirements.
reducing the resource (raw materials) is
the internal agent and the clerk 10. ER diagrams usually include the link
assuming control and increasing the tables in the model to resolve M:M
resource (work-in-process) is the associations. REA diagrams typically do
external agent. not show link tables. Explain.
●​ The inclusion of link tables in a REA
6. Explain how REA databases are able to diagram creates a conflict with the rule
support financial statement reporting when that an event entity should be
they do not employ journals and ledgers. connected to at least one resource and
●​ Journals, ledgers, and double-entry at least two agent entities. Although
bookkeeping are the traditional link tables are a technical requirement
mechanisms for formatting and for implementing a M:M association in
transmitting accounting data, but they a relational database, they are not a
 technical requirement for modeling the MULTIPLE-CHOICE QUESTIONS
database. Including the link table in an
REA diagram disrupts its visual 1. The concept of duality means that an
integrity and adds little to the REA diagram must consist of
conceptual model. During
implementation, the database designer a. two events—one of them economic and the
will create the link tables needed to other support.
make the database function.
b. two agents—one of them internal and the
11. Employee time is a resource that is other external.
always used but is not always modeled in c. two resources—one increased and the other
an REA diagram. Explain and give decreased by the same event.
examples.
●​ Unlike tangible economic resources d. all of the above.
such as cash and inventory, time does
not have a stock flow element and e. none of the above.
cannot be stored. It is increased
simultaneously decreased by various 2. Each economic event in an REA diagram
employee activities. In situations where is always
employee services are directly tracked
to products produced or services a. linked to at least two resource entities.
rendered to clients (i.e., consulting or
public accounting) it makes sense to b. linked to two external agents.
model this resource. In situations
where employee time on the job is not c. linked to two internal agents.
tracked to specific results then
modeling this entity and transforming it d. linked to another economic event.
into a physical database table serves no
purpose. e. linked to a support event.
12. When are data in 3NF? 3. Which of the following are
●​ Normalization is the process of characteristics of economic agents?
systematically identifying and removing
repeating groups, partial dependencies, a. They participate in economic events, but do
and transitive dependencies from the not assume control of the resources.
table(s) under review. Tables in 3NF will
be free of anomalies and will meet two b. They participate in economic events, but
conditions: not in support events.
○​ 1) All nonkey attributes will be
wholly and uniquely dependent c. Internal agents are employees of the
on (defined by) the primary key. company whose system is being modeled.
○​ 2) None of the nonkey attributes
will be dependent on (defined by) d. External agents are not employees of the
other nonkey attributes. company whose system is being modeled.
e. All of the above describe agents.
4. Which of the following is true?
a. REA diagram entities are arranged in
constellations by entity class.
b. ER diagrams present a static picture of the
underlying business phenomena.
c. Entity names in ER diagrams are always in
the noun form.
d. Events entity names in REA diagrams are
in the verb form.
e. All of the above are true statements.
5. Which of the following events would be
LEAST likely to be modeled in an REA
diagram?
a. customer inquiries
b. sales to a customer
c. accounts payable
 c. the primary key on the 1,1 side of the
d. cash relation should be embedded as the foreign
key on the 0,M side.
e. all of these events would be modeled
d. a link table must be created to accept the
6. Which of the following associations foreign keys of both tables.
would most likely describe the relationship
between an internal agent and an economic e. none of the above is true.
event?
a. 1:M
b. 1:1
c. M:M
d. 0:M
e. none of the above
7. Which of the following tables would most
likely have a composite key?
a. Take Order
b. Ship Goods
c. Inventory-Ship Link
d. Cash
e. none of the above
8. Which of the following associations
requires a separate table in the database?
a. 1:1
b. 1:M
c. M:M
d. all of the above
9. When assigning foreign keys in a 1:1
association
a. the primary key of each table should be
embedded as a foreign key in the related table.
b. the primary key on the 0,1 side of the
relation should be embedded as the foreign
key on the 1,1 side.
c. the primary key on the 1,1 side of the
relation should be embedded as the foreign
key on the 0,1 side.
d. a link table must be created to accept the
foreign keys of both tables. e. none of the
above is true.
10. When assigning foreign keys in a 1:M
association
a. the primary key of each table should be
embedded as a foreign key in the related table.
b. the primary key on the 0,M side of the
relation should be embedded as the foreign
key on the 1,1 side.