Event-driven accounting information systems McGraw-Hill/Irwin Accounting Information Systems © 2008 The McGraw-Hill Companies, Inc. All rights reserved. Chapter 13 Event-driven accounting information systems ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Outline Objectives Types of AIS Criticisms of view- driven systems REAL modeling Cardinalities Database creation ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Objectives When you finish studying this chapter, you should be able to: Compare and contrast view-driven and event-driven accounting information systems Use REAL modeling to represent an event-driven AIS Use a REAL model to design a relational database for an event-driven AIS ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Types of accounting information systems View-driven systems Traditional systems Support a single way of viewing the data: the general purpose financial statements May or may not incorporate information technology Event-driven systems More modern systems Support multiple views of the data; based on events and business processes Nearly always supported by information technology ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Criticisms of view-driven AIS Focus on a very small, well-defined group of important business events Often process data in batches, frequently at the end of the month Capture a very limited set of data—dates, accounts and amounts ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Criticisms of view-driven AIS Data are highly aggregated Data stored in multiple places Internal control process is often protective and expensive ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

REAL modeling Types of events Operating: activities involved with providing goods and services to customers Information: recording and maintaining data, as well as reporting information Decision / management: human decision making ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Resources: what agents need to complete events REAL modeling Resources: what agents need to complete events Events: strategically significant operating events Agents: people involved in the system Locations: where things happen ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

REAL modeling Events appear in the middle column Resources are on the left Agents are on the right Locations, when included, are shown wherever they fit logically ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

REAL modeling Buy inventory. Inventory Purchasing agent Vendor ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

REAL modeling Six-step development process includes: Understand the organization’s environment and objectives Review the business process and identify the strategically significant operating events Analyze each strategically significant operating event to identify the event resources, agents and locations ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

REAL modeling Identify the relevant behaviors, characteristics and attributes of the REAL model elements Identify and document the direct relationships among elements of the REAL model Validate the REAL model with business people ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Cardinalities Method for documenting direct relationships between elements of a REAL model Four-step process For each “x”, what is the minimum number of “y” involved? For each “x,” what is the maximum number of “y” involved? For each “y,” what is the minimum number of “x” involved? For each “y,” what is the maximum number of “x” involved? ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Cardinalities For each purchasing agent (“x”), what is the minimum number of buy inventory transactions (“y”)? Zero. For each purchasing agent, what is the maximum number of buy inventory transactions? Many. Buy inventory Purchasing agent (0,*) ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Cardinalities For each buy inventory transaction, what is the minimum number of purchasing agents? One. For each buy inventory transaction, what is the maximum number of purchasing agents? One. Buy inventory Purchasing agent (1,1) ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Cardinalities (1,1) (0,*) Purchasing agent Buy inventory ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Database creation Follow the rules of data normalization 1st normal form (1NF): eliminate repeating groups 2nd normal form (2NF): eliminate repeating groups AND eliminate redundant data 3rd normal form (3NF); eliminate repeating groups, redundant data AND columns not dependent on primary key ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Database creation When the maximum cardinalities between two elements of a REAL model are one and many, include the primary key from the “one side” in the table on the “many side.” Buy inventory Purchasing agent (0,*) (1,1) The primary key from the purchasing agent table will be a foreign key in the buy inventory table. ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES

Database creation When the maximum cardinalities between two elements of a REAL model are many and many, create a separate junction table to reflect the combined relationship. Three tables needed: inventory, buy inventory, and buy inventory / inventory Inventory Buy inventory (1,*) ACCOUNTING INFORMATION SYSTEMS BASIC CONCEPTS & CURRENT ISSUES