this chapter examines the resources, events, and agents (REA) model as a means of specifying and designing accounting information systems that serve
the needs of all of the users in an organization. The chapter is comprised of three major sections. The first introduces the REA approach and comments on the general problems asso- ciated with traditional accounting practice that can be
resolved through an REA approach. This section presents the
REA model and describes the structure of an REA diagram.
The basic REA model consists of three entity types (resources, events, and agents) and a set of associations link- ing them. Resources are things of economic value to the orga- nization and are the objects of economic exchanges with trading partners. REA events fall into two general groups: economic events and support events. Economic events are phenomena that effect changes (increases or decreases) in resources. Support events include control, planning, and man- agement activities that are related to economic events but do not directly effect a change in resources. Agents are individu- als within and outside the organization who participate in an economic event. A key feature of REA is the concept of eco- nomic duality. Each economic event is mirrored by another event in the opposite direction. These dual events constitute the give event and receive event of an economic exchange.
The second section presents the multistep process of view modeling to create an REA model. The focus here is on modeling a single view of the entire database. The steps involved are: (1) identify the event entities to be modeled, (2) identify the resource entities changed by events, (3) iden- tify the agent entities participating in events, and (4) deter- mine associations and cardinalities between entities.
The third and final section presents the task of view inte-
gration, in which several individual REA diagrams are inte- grated into a single enterprise-wide model. The steps involved in view integration are: (1) consolidate the individ- ual models; (2) define primary keys, foreign keys, and attributes; and (3) construct physical database and produce user views. The section concludes with a discussion of the advantages of REA in achieving competitive advantage.