1. Database Design Using the REA Data Model
Chapter 17
Database Design Using the REA Data Model
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2. Database Design Process
System Analysis
Conceptual Design
Physical Design
Implementation & Conversion
Operation & Maintenance
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

3. The System Analysis Process
Systems Analysis
Initial planning to determine the need for and feasibility of developing a new system
Judgments about the proposal’s technological and economic feasibility
Identify user information needs
Define the scope of the proposed new system
Gather information about the expected number of users and transaction volumes to make preliminary decisions about hardware and software requirements
Conceptual Design
Developing the different schemas for the new system at the conceptual, external, and internal levels
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4. Conceptual Design
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5. The System Analysis Process (cont’d)
Physical Design
Translating the internal-level schema into the actual database structures that will be implemented in the new system
New applications are developed
Implementation and Conversion
Includes all the activities associated with transferring data from existing systems to the new database AIS
Testing the new system
Training employees
Maintaining the New System
Eventually, changes in business strategy and practices or new IT developments lead to the need for a new system and the process starts over.

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7. Data Modeling
Process of defining an information system so it represents an organizations requirements
Occurs at two stages of the design process:
System analysis
Conceptual design
Data models:
Data flow diagrams (Chapter 3)
Flow charts (Chapter 3)
Entity-relationship diagrams (Chapter 17)
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8. Entity-Relationship Diagrams
Used to graphically represent a database schema
Depicts entities
Anything an organization wants to collect information about
In a relational database, separate tables would be created to store information about each distinct entity.
Relationships between entities
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9. In an E-R diagram, entities are depicted as rectangles.
But there are no industry standards for other aspects of these diagrams.
Sales
Inventory
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10. ENTITY-RELATIONSHIP DIAGRAMS
Some data modelers, tools, and authors use diamonds to depict relationships.
Sales
Inventory
Line
Items
Others do not use diamonds.
Sales
Inventory

11. E-R Diagram Variations
Primary key
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12. ENTITY-RELATIONSHIP DIAGRAMS
Sometimes the attributes associated with each entity are depicted as named ovals connected to each rectangle.
Example using an educational institution setting
Primary key

13. Resources-Events-Agents Diagram
Developed for designing AIS
Categorizing entities into:
Resources
Things that have economic value
Events
Business activities
Management wants to manage and control
Agents
People and organizations that participate in events
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15. THE REA DATA MODEL resources on this REA diagram Inventory Sales
Employee
Customer
Cash
Accounts
Receive
Cash
Employee

16. THE REA DATA MODEL events on this REA diagram Inventory Sales Employee
Customer
Cash
Accounts
Receive
Cash
Employee

17. THE REA DATA MODEL agents on this REA diagram Inventory Sales Employee
Customer
Cash
Accounts
Receive
Cash
Employee

18. REA Diagram Rules
Each event is linked to at least one resource that it affects.
Each event is linked to at least one other event.
Types of links (relationships):
Get events
Give events
Participation events
Each event is linked to at least two participating agents.
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20. Business Cycle Give–Get Relationships
The revenue cycle involves interactions with your customers.
You sell goods or services and get cash.
Give
Inventory
Get
Cash

21. Business Cycle Give–Get Relationships
The expenditure cycle involves interactions with your suppliers.
You buy goods or services and pay cash.
Give
Cash
Get
Inventory

22. Business Cycle Give–Get Relationships
The payroll resources cycle involves interactions with your employees.
Employees are hired, trained, paid, evaluated, promoted, and terminated.
Give
Cash
Get
Employee
Time

23. Business Cycle Give–Get Relationships
The financing cycle involves interactions with investors and creditors.
You raise capital (through stock or debt), repay the capital, and pay a return on it (interest or dividends).
Give
Cash
Get
Cash

24. Business Cycle Give–Get Relationships
In the production cycle, raw materials, labor, and machinery and equipment time are transformed into finished goods.
Give (Use) Raw
Materials
Give (Use) Employee Time
Get Finished Goods Inventory
Give (Use) Machinery & Equipment

25. Revenue Cycle REA Diagram
Batini notation
Take Order
Employee
(1,N)
(1,1)
(0,N)
(0,N )
(1,1)
Inventory
(0,1)
(0,N)
Customer
(0,N)
(0,1)
(1,1)
(0,N)
(1,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(0,N)
(1,N) or (0,N) ??
(1,1)
Cash
Receive
Cash
Customer
(1,1)
(0,N)
(0,N)
(1,1) or (0,1) ??

26. Developing an REA Diagram
Identify the events about which management wants to collect information.
Identify the resources affected by each event and the agents who participate in those events.
What economic resource is reduced by the “Give” event?
What economic resource is acquired by the “Get” event?
What economic resource is affected by a commitment event?
Determine the cardinalities of each relationship.
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

27. STEP ONE: IDENTIFY RELEVANT EVENTS
Example: Typical activities in the revenue cycle include:
Take customer order
Fill customer order
Bill customer
Collect payment

28. STEP ONE: IDENTIFY RELEVANT EVENTS
Take Order (Sale order)
Sale
Receive
Cash

29. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Take Order
(sale order)
Sale
the give event
Receive
Cash

30. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Take Order (sale order)
Inventory
Resource reduced by the give event
Sale
Receive
Cash

31. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Take Order (Sale order)
Inventory
Sale
the get event
Receive
Cash

32. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Take Order (sale order)
Inventory
Sale
Resource increased by the get event
Cash
Receive
Cash

33. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Agents involved in the sale
Take Order
(Sale order)
Inventory
Customer
Sale
Employee
Cash
Receive
Cash

34. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Agents involved in the receipt of cash
Take Order (Sale order)
Inventory
Customer
Sale
Employee
Cash
Receive
Cash
Customer

35. STEP TWO: IDENTIFY RESOURCES AND AGENTS
Agents involved in taking the order
Take Order (Sale order)
Employee
Inventory
Customer
Sale
Employee
Cash
Receive
Cash
Customer

36. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
The final step in an REA diagram for a transaction cycle is to add information about the relationship cardinalities.
A cardinality describes the nature of the relationship between two entities.
It indicates how many instances of one entity can be linked to a specific instance of another entity.
For example, the cardinality between the event Sales and the agent Customer answers the question:
For each sale a company makes, how many customers are associated with that sale?

37. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Unfortunately, there is no universal standard for diagramming cardinalities.
2 common Alternative formats are shown on the next slide
Batini style notation(my preference)
Assignments will use Batini notation
Book uses Crow’s feet

38. Crow’s Feet notation Batini notation
Copyright 2012 © Pearson Education, Inc. publishing as Prentice Hall

39. Cardinalities Describe the nature of relationships between entities
How many instances of one entity can be linked to each specific instance of another entity
Minimum can be: 0 or 1
Maximum can be: 1 or Many
Relationship type is based on maximum cardinality:
Three types of relationships
Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

43. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
It is not a “one size fits all” world for relationships and cardinalities. The cardinalities between two entities can vary based on how the particular company does business.

44. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
In relationships between events and agents:
For each event that occurs, the cardinality between event and agent is typically (1:1).
This is a general rule of thumb
Example: When a sale occurs:
There is usually one and only one customer.
There is usually one and only one salesperson. This practice makes it more feasible for the organization to establish employee accountability for the event.

45. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,1)
(1,1)
Inventory
Customer
(1,1)
Sale
(1,1)
Employee
(1,1)
Cash
Receive
Cash
Customer
(1,1) or (0,1) ??

46. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
For each agent the cardinality between agent and event is typically (0:N). (This is a general rule of thumb)
Example: For a particular salesperson:
There is typically a minimum of zero sales (allows for inclusion of a new salesperson who has not yet made any sales).
A salesperson can have a maximum of many sales.
Or: For a particular customer:
There is typically a minimum of zero sales (to allow for the inclusion of prospective customers who haven’t bought anything yet) and a maximum of many sales.

47. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,1)
(0,N)
(1,1)
Inventory
(0,N)
Customer
(1,1)
(0,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(1,1)
Cash
Receive
Cash
Customer
(0,N)
(1,1) or (0,1) ??

48. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Let’s now look at the relationship between events and resources.
In the cardinality between event and resource, the minimum cardinality is typically one, because an event can’t occur without affecting at least one resource.
This is a general rule of thumb

49. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1, )
(1,1)
(0,N)
(1,1)
Inventory
(0,N)
Customer
(1,1)
(0,N)
(1, )
Sale
(1,1)
(0,N)
Employee
(0,N)
(1,1)
Cash
Receive
Cash
Customer
(1, )
(0,N)
(1,1) or (0,1) ??

50. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
The maximum could be one or many.
In this particular story, each sale can involve many items of inventory, so the maximum is many.
(This is a general rule of thumb)
However, every receipt of cash is deposited to one and only one cash account, so the maximum there is one.
(This is a good business practice

51. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,N)
(1,1)
(0,N)
(1,1)
Inventory
(0,N)
Customer
(1,1)
(0,N)
(1,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(1,1)
Cash
Receive
Cash
Customer
(1,1)
(0,N)
(1,1) or (0,1) ??

52. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
In the cardinality between resource and event, the minimum is typically zero. (This is a general rule of thumb)
A company can have an inventory item for which there has never been a sale.
When the company’s cash account is new, there has never been a cash receipt deposited in it.

53. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,N)
(1,1)
(0,N)
(0 , )
(1,1)
Inventory
(0,N)
Customer
(0 , )
(1,1)
(0,N)
(1,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(1,1)
Cash
Receive
Cash
Customer
(1,1)
(0,N)
(0 , )
(1,1) or (0,1) ??

54. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
In the cardinality between resource and event, the maximum is typically many. (This is a general rule of thumb)
Most inventory items can be sold many times. (An exception might occur if each inventory item is one unique item, such as a piece of real estate.)
The company’s cash account can have many cash receipts.

55. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,N)
(1,1)
(0,N)
(0,N )
(1,1)
Inventory
(0,N)
Customer
(0,N)
(1,1)
(0,N)
(1,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(1,1)
Cash
Receive
Cash
Customer
(1,1)
(0,N)
(0,N)
(1,1) or (0,1) ??

56. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Relationships between events.
When events occur in a sequence, the minimum cardinality between the first event and the second event is (always or usually) zero, because there is a span of time (although possibly quite short) when the first event has occurred but there are zero occurrences of the second event.
Examples:
When an order is first taken, there have been no deliveries of goods (sale event) to the customer.
When goods are delivered to the customer, there is a span of time, however brief, in which there is no cash receipt from the customer.(see note below)
Note: REA model diagram is supposed to represent your business process. For a cash sale environment, many modelers would set minimum cardinality between sale and receipt as one

57. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
The minimum cardinality between the second event and the first event is typically one, because the second event can’t occur without the first event having occurred.
An exception could occur if the first event is not required for the second event to occur.
Example: If a sale can be made without first taking an order, then the minimum cardinality between sale and take order could be zero.

58. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
The maximums in the cardinalities between events can be either one or many, and these maximums vary based on business practices

59. STEP THREE: DETERMINE CARDINALITIES OF RELATIONSHIPS
Batini notation
Take Order
Employee
(1,N)
(1,1)
(0,N)
(0,N )
(1,1)
Inventory
(0,1)
(0,N)
Customer
(0,N)
(0,1)
(1,1)
(0,N)
(1,N)
Sale
(1,1)
(0,N)
Employee
(0,N)
(0,N)
(1,N) or (0,N) ??
(1,1)
Cash
Receive
Cash
Customer
(1,1)
(0,N)
(0,N)
(1,1) or (0,1) ??

60. Core REA Pattern

61. Core REA Pattern (No table for external agent)

62. REA Sales/Collection

63. THE Extended REA DATA MODEL (Revenue Cycle)

64. REA Acquisition/Payment

65. THE Extended REA DATA MODEL (Expenditure Cycle)