Data Modeling

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  • Topic: Balance sheet, Entity-relationship model, Sales order
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CHAPTER 17

DATA MODELING AND DATABASE DESIGN

SUGGESTED ANSWERS TO DISCUSSION QUESTIONS

17.1Why is it not necessary to model activities such as entering information about customers or suppliers, mailing invoices to customers, and recording invoices received from suppliers as events in an REA diagram?

The REA data model is used to develop databases that can meet both transaction processing and management analysis needs. Only events that either (1) directly change the quantities of resources, (2) represent commitments to future exchange events, or (3) that provide new information about activities that management wants to plan, evaluate, and control need to be included in such databases. None of the activities listed in the question satisfy these requirements.

Customer information is stored in rows in the customer table and supplier data is stored in rows in the supplier table. The bulk of this would have been entered when the database was initially created and the customer and supplier tables created and populated. Subsequently, new rows would be entered in these tables as a by-product of other events that management does want to plan, evaluate, and control – such as a sales call, the receipt of an order from a new customer, or placing an initial order with a new supplier.

Data processing activities, such as preparing reports or transcribing data from a form, are not explicitly modeled because they do not change information about any resources nor are they fundamental activities which management wants to control. (Consider: How often are managers concerned about how many reports a given employee prints in one day?) Indeed, all the information contained in a vendor invoice is already in the purchasing company’s database before the vendor invoice arrives: the quantity ordered is known when the order is placed, as is the quoted price and terms of payment, and the quantity received in good condition is known when the receiving report is stored.

Consequently, there is no need to explicitly model activities such as mailing or recording invoices as events in an REA data model. In fact, many administrative data processing activities are not even necessary steps in the value chain. For example, with the advent of sophisticated AIS, particularly ERP systems, many companies are requesting their suppliers not to send them any invoices.

17.2The basic REA template includes links between two events and links between events and resources and between events and agents. Why do you think the basic REA template does not include direct links between (a) two resources, (b) two agents, or (c) between resources and agents?

a. The basic REA template was developed to assist in modeling an organization’s economic transactions and, therefore, centers on events, the resources they affect, and the agents who participate in them. Two events can be linked to reflect economic duality (the give-to-get relationship) or causal sequence (orders precede sales).

Most resources are independent of one another and thus do not need to be directly linked. For example, inventory and cash do not directly affect one another, but only do so through events such as the sale of inventory and subsequent receipt of cash. Nevertheless, in chapter 19 we will see that sometimes two resources may be directly linked to one another in order to represent information about location, such as in which warehouse inventory is stored.

b. Similarly, the basic REA template does not directly link agents to one another because they often do not influence one another. As with...
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