Chapter 10. The REA Approach to Business Process Modeling. Objectives for Chapter 10. Limitations of traditional database system Benefits of adopting an REA approach to information systems compared to a traditional approach Implications of REA for the accounting profession
The REA Approach to Business Process Modeling
Assets = Liabilities + Owners’ Equity
Human resource management
Not widely used;
Requires detailed analysis
Loss of non-economic information
Operating events--activities that produce goods and services
Information events--activities associated with recording, maintaining, and reporting information
Decision/Management events--activities that lead to decisions being taken
Horizon Books is a bookstore in downtown Philadelphia. It carries an inventory of approximately 5,000 books. Customers come in and browse the shelves, select their books, and take them to one of three cashiers positioned in different parts of the store. One of the cashiers is situated at an information desk where customers can discover whether a particular book is in stock, place orders for books not currently available in the bookstore, and collect and pay for books previously ordered. The cashier at the information desk has a book database that is consulted for every query. There are no credit sales. All customers pay for their purchases at the time of purchase.
Step 1: Identify operating events in Horizon Books’ sales model.
Step 2: Place Horizon Books’ operating events in sequence.
Step 3: Identify resources and agents associated with events.
Step 4: Establish Horizon Books’ sales process relationships.
Step 5: Completed REA model of Horizon Books’ sales process with cardinalities.
Using the customer as an example, these data include:
Customer name Customer address Customer telephone number
Amount owed by customer
Value of total sales to date
Terms of trade offered
Customer credit rating
Damaged goods record
On-time payment record
Customer volume record
Past Due Accounts