AIS Romney 2006 Slides 17 Special Topics in REA
AIS Romney 2006 Slides 17 Special Topics in REA
AIS Romney 2006 Slides 17 Special Topics in REA
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INTRODUCTION
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INTRODUCTION
• The previous two chapters introduced the
topic of REA data modeling and explained
how to implement an REA model in a
relational database.
• We focused on revenue and expenditure
cycle activities for a typical retail
organization.
• This chapter extends those basic
concepts to other types of businesses and
transaction cycles.
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ADDITIONAL REVENUE CYCLE
MODELING TOPICS
• The revenue cycle REA models we’ve
already developed focused on activities
performed by a typical retail store. Events
included:
– Taking customer orders
– Filling those orders
– Collecting payment
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MANUFACTURERS AND DISTRIBUTORS
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Call on Customer Customer
Employee (Salesperson)
Customer
Employee (Shipping)
• Many of the entities and relationships
depicted in in this diagram have already
Ship Order Carrier
been discussed, so we’ll focus on the new
ones or ones we’ve not discussed in
depth. Customer
Call on Customer
Employee (Salesperson)
Customer
Employee (Shipping)
• Sales calls do not always result in
orders, so the minimum cardinality
from the call on customer event toOrder
Ship the Carrier
take order event is 0.
• Though a single call may be followed
Customer
by many orders, it is easier to evaluate
sales force productivity by linking each
call only
Cash to orders placed at the time
Receive Cash Employee (Cashier)
the call is made, so the maximum
cardinality here is 1.
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Call on Customer Customer
Call on Customer
Employee (Salesperson)
Customer
Customer
Employee (Shipping)
– The two events occur sequentially, so for every order taken, the
order
Cash can be filled a minimum ofCash
Receive zero times. Employee (Cashier)
– The maximum cardinality is N, because some items may not be in
stock and will have to be filled later.
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Call on Customer Customer
Customer
Employee (Shipping)
Customer
• For every time an order is filled, there must be at least one order
(minimum
Cash of 1), and because Receive
best practice
Cash is to fill each Employee
order (Cashier)
immediately, there should be a maximum of one take order for every fill
order event.
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• The warehouse activity of filling an order is separate from the activity
Call on Customer Customer
of actually shipping (or delivering) the order.
• The fill order event represents the picking and packing activity.
Employee (Salesperson)
Customer
Employee (Shipping)
Customer
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• The relationship between fill order and ship order is one-to-one.
Call on Customer Customer
• The fill order event occurs first, so for every order filled, there is a
minimum of zero shipping events.
Employee (Salesperson)
• Each order is typically sent as one shipment, so for every order filled,
there is a maximum of one Take
shipment.
Customer Order
Customer
Employee (Shipping)
Customer
Ship Order
Cash Receive Cash Employee (Cashier)
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• Each shipment is
Call on Customer Customer
typically linked to one
and only one fill order
event. Employee (Salesperson)
Customer
Employee (Shipping)
Customer
Ship Order
Cash Receive Cash Employee (Cashier)
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MANUFACTURERS AND DISTRIBUTORS
• Attribute Placement
– The primary key of the shipping event is the shipment number.
– The bill of lading number is another attribute in the shipping
event.
• The bill of lading number is not the primary key because it
can be null for deliveries made with the company’s own
vehicles.
– The sales invoice number is another attribute of the shipping
event.
• The invoice number is not the primary key because some
companies use electronic invoices or eliminate invoices
altogether.
• Also, if the invoice number were used as the primary key, it
would be null until such time as an invoice were actually
issued, which may often occur after shipment.
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MANUFACTURERS AND DISTRIBUTORS
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MANUFACTURERS AND DISTRIBUTORS
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• The REA diagram
Call on Customer Customer
identifies different
employees who participate
in each event by their job Employee (Salesperson)
functions.
Take Customer Order
• Makes it easier to use the
Customer
diagram as a guide to
verify whether duties are
properly segregated.
Inventory Fill Customer Order Employee (Warehouse)
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SALE OF SERVICES
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SALE OF SERVICES
Services Employee
Sales
Inventory Customer
Receive
Cash Employee
Cash
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SALE OF SERVICES
Services Employee
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• The minimum cardinality
between the service
SALE OF SERVICES resource and the sale
event is typically 0,
because some services
may never be sold.
Services Employee
Sales
Inventory Customer
Receive
Cash Employee
Cash
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• The minimum cardinality
between the sales event and
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RENTAL TRANSACTIONS
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Return
Item • EachCustomer
row in the
rent item event
entity records
information about
Rental the rental of one
Inventory Employee
specific item, such
as date and time of
Rent rental, rental price,
Item and terms.
• If a customer rents
multiple items,
Customer
each item is
treated as a
separate rental
event, since the
items must be
Receive tracked
Cash Employee
Cash individually.
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Return Customer
Item
Rental
Inventory Employee
Rent
• The rent item event Item
is linked to both
the receive cash Customer
and return item
events.
Receive
Cash Employee
Cash
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• In the cardinality
between rent item
Return and Customer
receive cash:
Item – The minimum
cardinality of 1
reflects that the
Rental customers
Inventory typically
Employee pay
first before
Rent taking
Item possession.
– The maximum
of N reflects
Customer
that there may
be additional
charges when
the rental item
is returned.
Receive
Cash Employee
Cash
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• In the cardinality
between receive
Return cashCustomer
and rent item:
Item – The minimum
cardinality is 0,
because
Rental payment is
Inventory made before
Employee
the rental is
Rent provided.
Item – The maximum
is 1, assuming
the receive
Customer
cash event is
linked to one
and only one
rental.
Receive
Cash Employee
Cash
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• The relationship
between rent item
Return and Customer
return rental is
Item 1:1. Assumes:
– The rental of
each item is
Rental tracked
Inventory separately.
Employee
– Each item can
Rent only be
Item returned once.
– Minimums
represent
Customerthe
temporal
sequence of
events.
Receive
Cash Employee
Cash
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ADDITIONAL EVENTS
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Supplier
Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
• Most of
Financial the entities
Institution and relationships were explained in previous
chapters. Supplier
• The request goods event provides a way to collect data about the
formal Cashprocess that exists in many larger organizations to
Pay for Goods request
Employee the
(Cashier)
purchase of goods.
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Supplier
Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
• The cardinality
Financial Institution between request goods and order goods:
Supplier
– Has a minimum of 0 because of time sequence and the denial of
some requests.
– Has Casha maximum of N, because Pay fora Goods
particular request can Employee
result(Cashier)
in
multiple
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Supplier
Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
requests.
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ATTRIBUTE PLACEMENT
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• The relationship Supplier
between receive
goods and Request Goods Inventory Control
receiving
employees is M:N
because: Employee (Supervisor)
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• Two new entities,
Supplier
warehouses and
Request Goods
financial
Inventory Control
institutions,
appear in this
diagram.
Employee (Supervisor)
Warehouse
• Companies may
have multiple
Receive Goods Employee (Warehouse)
warehouses.
Financial Institution
Supplier
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• In the cardinality
Supplier
between warehouse
and inventory:
Request Goods Inventory Control
– The minimum is
0, because a
warehouse
Employee (Supervisor)
could be empty.
Order Goods
– The maximum is
Employee (Purch. Clerk)
N, because a
warehouse
Inventory could store
Supplier
many inventory
items.
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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• In the cardinality
Supplier
between inventory
Request Goods
and warehouse:
Inventory Control
– The minimum is 0,
because an
Employee (Supervisor)
inventory item may
Order Goods be tracked by the
company
Employee although
(Purch. Clerk)
there is none in
stock.
Inventory Supplier
– The maximum is N,
because some
items could(Receiving)
Employee be
Warehouse
stored in multiple
warehouses.
Receive Goods Employee (Warehouse)
Financial Institution
Supplier
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• Linking the receive Supplier
goods event to the
warehouse entity Request Goods Inventory Control
makes it possible to
evaluate performance
at different locations. Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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• Each row in the cash table would correspond to a specific Supplier
general ledger account that is aggregated in the balance
sheet under the heading “Cash and Cash Equivalents.” Inventory Control
Request Goods
Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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• In the cardinality from the cash resource to financial Supplier
institutions:
– The minimum is zero, because Requestthe account “petty cash”
Goods is Control
Inventory
not stored at a financial institution.
– Since an account can only be located at one financial
Employee (Supervisor)
institution, the maximum is 1.
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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• In the cardinality from financial institutions to cash: Supplier
– The minimum is zero, because the company may include
information on a financialRequest
institution
Goods in which they doInventory
not Control
yet have an account or have recently closed an account.
– The maximum is zero, because multiple accounts can be
Employee (Supervisor)
kept at one bank.
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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• The relationship between the inventory resource and supplier Supplier
agent reflects the best practice of having several alternate
suppliers for a particular inventory item.
Request Goods Inventory Control
Employee (Supervisor)
Order Goods
Inventory Supplier
Employee (Receiving)
Warehouse
Financial Institution
Supplier
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ACQUISITION OF INTANGIBLE
SERVICES
• An organization may acquire intangible
services such as Internet access, phone
service, and utilities.
• The give-to-get exchange involves
acquiring services and paying for them.
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ACQUISITION OF INTANGIBLE SERVICES
General and
Admin. Employee
Services
Acquire
• Payments appear Services
in the cash
disbursements Supplier
table.
Disburse
Cash Employee
Cash
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• A separate event, acquire services, is used to collect data about the
acquisition of those services.
• ACQUISITION OF INTANGIBLE SERVICES
The acquire services table stores information about the actual amount
of services consumed and the actual prices charged.
General and
Admin. Employee
Services
Acquire
Services
Supplier
Disburse
Cash Employee
Cash
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• Acquire services is
linked to a general and
ACQUISITION OF INTANGIBLE SERVICES administrative
services resource
entity.
General and • The resource entity
Admin. includesEmployee
information
Services such as:
Acquire – Length of contract
Services (if any).
– Starting date.
– Budgeted cost for
Supplier
the service.
– Budgeted or
standard amount to
be provided each
period.
Disburse
Cash Employee
– Limitations or
Cash
special
requirements.
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• The relationship between acquire services and the resource is typically
1:N because each service is typically acquired separately from a
ACQUISITION OF INTANGIBLE SERVICES
different supplier.
General and
Admin. Employee
Services
Acquire
Services
Supplier
Disburse
Cash Employee
Cash
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• The relationship between acquire services and cash disbursement is
modeled as 1:1 to reflect that the organization obtains the use of a
ACQUISITION OF INTANGIBLE SERVICES
service for a particular period and makes a payment each month for
the services it acquired and used that month.
General and
Admin. Employee
Services
Acquire
Services
Supplier
Disburse
Cash Employee
Cash
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RENTING RESOURCES
• Organizations sometimes rent resources rather than
purchase.
• The basic give-to-get involves:
– Pay the supplier
– Get the right to the resource for a period
• Information on payments is in the cash disbursements
table.
• A separate rent resource event may be created to
represent acquisition of the resource.
• Although it is rented, the resource will also be included in
the model as a separate entity, because the company
needs to maintain information about it.
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RENTING RESOURCES
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PRODUCTION CYCLE MODEL
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• There are four
Raw Materials Bill of Materials
main events of
interest:
– Issue raw
materials
Employee Issue Raw
– Perform
(Inventory Control) job Materials
operations
(use labor)
– Perform
Employee
machine
(Factory)
Perform Job Finished Goods
operations Work in Process
Inventory
Operations
– Produce new
finished
products
Employee
(represented
(Supervisor)
Employee Time
Job Operations
List
by the work-
in-process
event) Machine
Perform Mach.
Equipment Operations List
Operations
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Raw Materials Bill of Materials
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• The machine
Raw Materials Bill of Materials operations list
stores the
instructions for
actions to be
Employee Issue Raw performed with
(Inventory Control) Materials
the equipment.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• The job operations and machine operations lists
Raw Materials store data about the Bill of Materials
standard time it should take to
perform the operations.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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Raw Materials Bill of Materials
Employee
(Supervisor) Job Operations
Employee Time
List
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Raw Materials Bill of Materials
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
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• Data about raw materials
Raw Materials Bill ofused
Materials
in production is
stored in the raw materials
issuance entity.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• Information about actual labor
Raw Materials Bill of Materials
performed and the time required
to do so are stored in the job
operations entity.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• Information about actual
Raw Materials Bill of Materials
machine operations performed
and the time required to do so
are stored in the machine
operations entity.
Employee Issue Raw
(Inventory Control) Materials
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• Performance can
Rawevaluated
Materials Bill of Materials
be by
comparing data
in the preceding
three event
entities
Employee with Issue Raw
(Inventory Control) Materials
information
about standards
stored in the
corresponding
Employee
information
(Factory)
Perform Job Finished Goods
Work in Process
entities: Operations Inventory
– Bill of
materials
Employee
–(Supervisor)
Job
Job Operations
operations Employee Time
List
list
– Machine
Perform Mach. Machine
operations
Equipment
Operations Operations List
list.
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PRODUCTION CYCLE MODEL
• The job operations event entity is an example of a
“give” event.
– Records the use of employee time.
– Each row in the table records info about how much time
an employee spent working on a particular job.
– If an employee worked on 3 different jobs in a day, there
would be three rows in the table for that employee on
that day.
– Collecting this detailed info about how factory
employees use time enables manufacturers to
accurately assign labor costs to different production
batches and product lines.
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PRODUCTION CYCLE MODEL
• The machine operations event is similar to the job
operations event except it records information about the
use of a specific piece of equipment.
• Useful to:
– Assign costs to products
– Schedule maintenance
• The machine operations event is not used to record
depreciation.
– Depreciation does not correspond to actual equipment use.
– Depreciation is not modeled as an event.
– Data needed to calculate depreciation (expected life, residual
value, etc.) are stored in the resource entity, but the calculation is
not treated as an event.
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• The relationship between the job operations event and the job
Raw Materials list is modeled as 1:N. Bill of Materials
operations
– The lists store information about standard time, while the events
store information about actual time.
–Employee
Each actual event can be linked to only one standard.
Issue Raw
– However,
(Inventory Control) each standard is likely to be linked to many actual
Materials
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• The same can be said of the relationship between the machine
Bill of Materials
Raw Materials event and the machine operations
operations list.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• The work-in-
Raw Materials Bill of Materials
process entity
collects and
summarizes data
about the raw
materials,
Employee labor, Issue Raw
(Inventory Control) Materials
and machine
operations used
to produce a
batch of goods.
Employee
(Factory)
Perform Job Finished Goods
Work in Process
Operations Inventory
Employee
(Supervisor) Job Operations
Employee Time
List
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• The relationship
Raw Materials Bill of Materials
between W-I-P
and the three
event entities are
1:N.
Employee Issue Raw
• (Inventory
Each production
Control) Materials
run may involve
a number of raw
materials
issuances,
Employee labor
(Factory)
operations, and Perform Job Finished Goods
Work in Process
machine Operations Inventory
operations.
• Each activity is
Employee
linked to a
(Supervisor) Job Operations
particular Employee Time
List
production run.
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• Internal events differ from
Raw Materials Bill of Materials
other events in that they are
typically linked to only one
agent.
– They do not involve
Employee Issue Raw
(Inventory Control) Materials exchange or transfer of
resources.
– They represent
consumption of resources
Employee
(Factory)
such as an employee’s
Perform Job
Work intime or use of equipment.
Process
Finished Goods
Operations Inventory
– The event is linked to the
agent about whom
management wishes to
Employee
(Supervisor) collect information for
Job Operations
Employee Time
product
List costing or
performance evaluation
measures. Machine
Perform Mach.
Equipment Operations List
Operations
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• Relationships between
Raw Materials Bill of Materials
internal agents may be
created to model lines of
responsibility.
– This diagram depicts a 1:N
Employee Issue Raw
(Inventory Control) Materials relationship between
employees and
supervisors.
• Each employee has one
Employee
(Factory)
supervisor.
Finished Goods
Work in •Process
Perform Job A supervisor can have
Operations Inventory
many subordinates.
– In a matrix style of
Employee
organization, this
(Supervisor)
Employee Time
relationship would be M:N,
Job Operations
List
since each employee could
have multiple supervisors.
Perform Mach. Machine
Equipment Operations List
Operations
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RELATIONSHIPS BETWEEN AGENTS
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COMBINED HR/PAYROLL MODEL
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• The record time
worked event is Training Providers Track Time
Used
necessary to
calculate payroll.
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
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Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
labor costs
(referred to as
job operations
Evaluate
in a Hire
Applicants
Applicants Perform-
Employee
(Supv.)
manufacturer). ance
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• The other events represent
Training Providers important
Track Time HR activities.
Used
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
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Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
• The employee
Record
entity is Applicants Time Cash
linked to Worked
importance of
employees to
the
Evaluate
organization. Hire
Applicants Perform-
Employee
Applicants (Supv.)
ance
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COMBINED HR/PAYROLL MODEL
• The employee entity stores much of the data
typically found in the payroll master file, including:
– Name
– Date hired
– Date of birth
– Pay rate
– Job title
– Supervisor
– Number of dependents
– Withholding allowances
– Voluntary deductions
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Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
• The skills entity contains data
Record
Applicants about the Time
different job skills
Cash of
Worked
interest to the organization.
Interview
Applicants – There is a row in the table
for each major skill.
Employees
– EachDisburse
employee can have Employee
Cash (Cashier)
several skills.
– Every skill can be attained
by numerous employees.
Evaluate
Hire
Applicants
– Therefore
Perform-the relationship
Employee
Applicants (Supv.)
betweenanceskills and
employees is M:N.
© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 80 of 96
Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
– This entity stores data for use in evaluating effectiveness and cost
of training efforts.
– Each employee Hire
can go to numerous events. Evaluate Employee
Applicants Perform-
– Each training event can involve multiple employees.
Applicants
ance
(Supv.)
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
• Let’s look at the relationship between skills and the training event.
– Each course isHire designed to develop one skill. Evaluate Employee
Applicants Perform- (Supv.)
Applicants
– Each skill may be taught at many training events. ance
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
openings.
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Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
Employees
Employee
Recruit Time
Skills
Applicants
Record
Applicants Time Cash
Worked
Interview
Applicants
Disburse Employee
Employees (Cashier)
Cash
© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 86 of 96
• A job operations
event tracks howTraining Providers Track Time
Used
factory workers
spend their time so
labor costs can be
Employees
allocated to
products.
Employee
• Professional Recruit Time
Skills
services firms, such
Applicants
order to accurately
bill clients. Disburse Employee
Employees (Cashier)
• The track time used Cash
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COMBINED HR/PAYROLL MODEL
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Training Providers Track Time
Used
Employees
Employee
Recruit Time
Skills
Applicants
• The track time used
entity is not needed Record
Applicants Time
if the organization Worked
Cash
their employees’
use of time. Employees
Disburse Employee
(Cashier)
Cash
• When such an
event is included,
the employee time
resource is seldom Hire
Applicants
Evaluate
Perform-
Employee
Applicants (Supv.)
implemented as a ance
table.
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FINANCING ACTIVITIES DATA MODEL
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• The issue debt
event is a special
kind of cash Transfer
Issue Debt Agent
receipt, so it is
connected to the
cash resource
entity.
Employee
Cash Disburse
Cash
Transfer
Agent
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FINANCING ACTIVITIES DATA MODEL
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Transfer
Issue Debt Agent
Employee
Cash Disburse
Cash
Transfer
Agent
• Most companies sell debt instruments through a financial intermediary
(transfer agent) rather than deal directly with individual creditors.
• This transfer agent maintains the necessary information about individual
creditors, so that interest payments and principal repayments can be made
correctly. Issue Stock Employee
• Therefore, an issue debt event contains data only about the aggregate
amount received, not the amount
© 2006 Prentice Hall Business Publishing
issued to each individual
Accounting Information Systems, 10/e
creditor.
Romney/Steinbart
93 of 96
Transfer
Issue Debt Agent
Employee
Cash Disburse
Cash
Transfer
Agent
• Debt-related payments of interest and principal are written to the
transfer agent for the aggregate payments on a particular bond or
note.
• The transfer agent handles issuance of the individual checks.
• Therefore, on the company’sIssue
part, Stock
the transfer of funds is recorded as
Employee
a single row in the cash disbursements table.
• So the cardinality between issue debt and disburse cash is (1:1).
© 2006 Prentice Hall Business Publishing Accounting Information Systems, 10/e Romney/Steinbart 94 of 96
• Equity transactions are modeled in a manner similar to debt transactions.
– Issue stock is a special type of cash receipt.
– Dividend payments are a special type of cash Transfer
disbursement.
Issue Debt Agentso the
– Most companies deal with transfer agents to handle these events,
agents typically involved in the transactions are:
• The treasurer (internal agent); and
• The transfer agent.
Employee
Cash Disburse
Cash
Transfer
Agent
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SUMMARY
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