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Introduction
With the increasing dependence on Accounting Information Systems in today's world, a way to help map out construction of these systems comes in the form of REA. Conceptualized in 1982, the acronym stems from Resource, Events, and Agents, all of which are important to constructing the diagrams used to help creators of REA models visualize the input and output components of accounting processes. Diagrams consist of two icons, each representing a business process, linked by one of several lines that signal predetermined relationships. The growing popularity of these models has made it a staple in the teaching curriculum of many AIS and computer science courses in colleges across the globe.
Components of REA
It is necessary to first define a few terms making the explanation of REA easier. First, an entity is anything about which the company wants to collect information. REA classifies these entities into three separate categories, which is how the model got its name; Economic Resources, Economic Events, and Economic Agents. Resources are those things that have economic value to the firm. Events are those actions which the organization wants to collect information about, such as a sale. Finally, Agents are those parties which participate in the event, for instance, salesmen.
The theory of REA is based on the semantic approach to modeling. This top down approach to REA development starts out with the designer identifying several events in the business process. This could be something as easy as making a sale. The next step is to identify an agent and a resource used in the transaction. In our sale example, the identified agent may be a sales person and the resource could be a ...