1. 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

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

3. 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

4. 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

5. 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

6. 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

7. 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

8. 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

9. 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

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

11. 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

12. 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

13. 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

14. 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

15. 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

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

17. 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

18. 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

19. 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