1 / 18

An REA Model of an Economic Exchange

An REA Model of an Economic Exchange. William E. McCarthy* Michigan State University (These slides may be copied as long as original source is cited) * http://www.msu.edu/user/mccarth4/.

wballesteros
Download Presentation

An REA Model of an Economic Exchange

An Image/Link below is provided (as is) to download presentation Download Policy: Content on the Website is provided to you AS IS for your information and personal use and may not be sold / licensed / shared on other websites without getting consent from its author. Content is provided to you AS IS for your information and personal use only. Download presentation by click this link. While downloading, if for some reason you are not able to download a presentation, the publisher may have deleted the file from their server. During download, if you can't get a presentation, the file might be deleted by the publisher.

E N D

Presentation Transcript

  1. An REA Model of an Economic Exchange William E. McCarthy* Michigan State University (These slides may be copied as long as original source is cited) *http://www.msu.edu/user/mccarth4/

  2. Cookie-Monster (the customer) and Elmo (the entrepreneur) meet in the (real or virtual) marketplace, thus setting the stage for an Economic Exchange

  3. Economic Resource Economic Event Economic Agent duality Economic Exchange Pattern R E A Source: W. E. McCarthy “The REA Accounting Model: A Generalized Framework for Accounting Systems in a Shared Data Environment,”The Accounting Review, July 1982, pp 554-78. W.E. McCarthy “The REA Modeling Approach to Teaching Accounting Information Systems,” Issues in Accounting Education, November 2003, pp. 427-41. (source of following slides)

  4. Cookie-Monster (the customer) and Elmo (the entrepreneur) engage in a SHIPMENT (transfer of Cookie Inventory)

  5. Economic Resource Economic Resource Economic Agent Economic Agent Economic Agent Economic Agent Economic Event stock-flow stock-flow inside participation outside participation outside participation duality COOKIES ELMO SALE cookie monster Give Take Economic Event inside participation REA model of cookie sale from entrepreneur’s (ELMO) perspective

  6. Cookie-Monster (the customer) and Elmo (the entrepreneur) engage in a PAYMENT (transfer of Cash)

  7. Economic Resource Economic Resource Economic Agent Economic Agent Economic Agent Economic Agent Economic Event stock-flow stock-flow outside participation outside participation inside participation duality COOKIES ELMO SALE cookie monster Give Take cookie monster Economic Event CASH RECEIPT inside participation ELMO CASH REA model of cookie sale from entrepreneur’s (ELMO) perspective

  8. Economic Resource Economic Resource Cookies Salesperson Cashier Economic Agent Economic Agent Economic Agent Economic Agent Economic Event stock-flow stock-flow Sale outside participation outside participation inside participation Customer Customer Give Take Economic Event Cash Receipt inside participation duality Cash more general exchange model from the entrepreneur’s (ELMO’s) internal perspective

  9. COOKIES COOKIES-stockflow-SALE SALE-duality-CASH_RECEIPT SALE Partial Database for Elmo’s Cookie Business Why is this invoice amount $14.75 ?? How is customer paying for this ???

  10. business process business process business process labor cash cash cookies Acquisition Cycle Conversion Cycle Revenue Cycle cookie ingredients value chain A business process is a set of activities that takes one or more kinds of input and creates an output that is of greater value to the customer (Hammer and Champy) A value chain is a purposeful network of business processes aimed at assembling the individual components of a final product (i.e., its portfolio of attributes) of value to the customer (Porter and Geerts/McCarthy) Part of ELMO’sValue Chain for Providing Cookies

  11. Semantic infrastructure of system matches extended REA pattern Enterprise Information Systems Basic Accounting Systems Counting artifacts e-collaboration systems Enterprise Systems classification structure is from David, McCarthy & Sommer, Communications of the ACM, May 2003, pp. 65-9.

  12. Different perspectives on REA modeling needed for enterprise modeling (value chains) and collaboration space (supply chains) • Enterprise modeling (as evidenced in normal ERP systems) is done from the perspective of one company or entrepreneur. Business processes are viewed as components of a single value chain. A single exchange (like the sale of a product for money) would be modeled twice, once in the enterprise system of each trading partner. • Collaboration space modeling (as evidenced in ebXML or ISO Open-edi) is done from a perspective independent of each trading partner. A single exchange is modeled once in independent terms that can be then mapped into internal enterprise system components. Supply chains are networks of business processes that alternate internal transformations and external exchanges (definition due to Bob Haugen). • REA modeling works in both cases and the independent to trading partner mapping is absolutely straightforward and completely defined.

  13. Illustration of Perspective: Trading Partner vs. Independent Enterprise Independent view of Inter-enterprise events Enterprise Business Process Business Process Business Process Business Process Business Process Business Process Business Process Business Process Business Process Enterprise Trading Partner view of Inter-enterprise events (upstream vendors and downstream customers) Blue arrows represent flow of goods, services, and cash between different companies; green arrows represent flows within companies Used for collaboration space modeling SOURCE: Adapted from ISO 15944-4, K. Morita

  14. Economic Resource Economic Resource Economic Agent Economic Agent Economic Agent Economic Agent Economic Event stock-flow stock-flow duality COOKIES from ELMO SHIPMENT cookie monster to initiating transfer responding transfer to ELMO Economic Event PAYMENT from cookie monster CASH REA model of cookie sale from independent (collaboration space) perspective

  15. Ontological Extensions to the REA Model (Geerts and McCarthy) • Type images for basic objects allows specification of policies and controls plus abstract specification of negotiation components • Commitment images for economic events allows specification of contracts and agreements • State machine model allows specification and ordering of business events as collaboration space messaging and/or internal workflow • Aggregation of binary collaborations allows mediated collaboration with third parties SOURCE: Geerts and McCarthy, The Ontological Foundations of REA Enterprise Information Systems, 2003.

  16. Business Transaction governs Agreement Economic Event Type Economic Resource Type typifies establish specifies specifies Business Role involves Economic Commitment specifies qualifies reciprocal fulfills reserves typifies Regulator Economic Resource Economic Event stockflow Economic Agent from to constrains duality Economic Contract Partner Third Party requires Bilateral Collaboration Mediated Collaboration participates ISO Open-edi Ontology Collaboration Model SOURCE: Adapted from ISO 15944-4, W.E. McCarthy

  17. Cookie-Monster and Elmo after their economic exchange (both economic agents have now reached higher levels of utility)

  18. Cookie Monster and Elmo are of course characters from the Public Broadcasting Service TV show Sesame Street*. Their use here is only illustrative. Cookie Monster is a great example of a typical buyer (has money, wants goods) because he is most happy when he has a cookie to eat. The use of Elmo as a typical seller (has goods, wants money) is only a convenient illustration. The Cookie Monster shown was a favorite toy of my daughter Meghan. The Elmo was bought for me by my wife Jane.* see http://www.sesameworkshop.org

More Related