33:010:458 33:010:458 A Accounting Information Accounting - PowerPoint PPT Presentation

33:010:458 33:010:458 A Accounting Information Accounting Information A ntin ntin Inf rm ti n Inf rm ti n Systems Systems y Dr. Peter R. Gillett Dr. Peter R. Gillett Associate Professor Department of Accounting, Business Ethics and Information Systems Rutgers Business School–Newark and New Brunswick

Accounting Information Systems A.I.S. Class 9: Outline A.I.S. Class 9: Outline � Orville Ornaments: Questions? � REA Modeling - a formal approach g pp � Extended REA Ontology � Group Work p � Designing the Data Repository Structure for RDBMS � Implementing the Design � Group Projects – Flowcharting p j g September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 2 2

Accounting Information Systems Orville Ornaments: Questions? Orville Ornaments: Questions? September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 3 3

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach Terminology for Events: Murthy Murthy Denna Denna David David McCarthy cCarthy Gillett Gillett & Groomer & Groomer Economic Core Economic Economic Economic Non-economic Support Business Commitment Commitment --- Business Information Information Information Information Information September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 4 4

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � Economic events increase or decrease economic resources � Resources Resources are scarce, have utility and are scarce, have utility and are under are are under are under the under the the control he control control of an enterprise control of of an an enterprise enterprise nterprise � Agents are those who participate in events September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 5 5

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � Economic exchanges are pairs of related events � Duality relationship * In an economic exchange one resource is In an economic exchange, one resource is incremented while another is decremented * The The dual The The dual dual events dual events events need vents need need not eed not not be not be be simultaneous be simultaneous simultaneous simultaneous nor need one be a precursor nor need one be a precursor to the other to the other September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 6 6

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � Synergy relationships * Multiple events that occur in conjunction with p j each other and result in the whole being greater than the sum of the parts September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 7 7

Accounting Information Systems REA Modeling - REA Modeling - a Formal Approach a Formal Approach � Identify each economic exchange � Model each exchange using REA � Perform view integration to consolidate exchange diagrams � Verify that there are events to increment � V if th t th t t i t and decrement each resource � Verify that every event participates in a � Verify that every event participates in a duality relationship � Integrate supporting business events Integrate supporting business events September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 8 8

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � A more radical view of events is taken here: * only needed events should be added * they should be modeled in accordance with they should be modeled in accordance with business realities rather than traditional accounting conventions * this view facilitates business process reengineering September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 9 9

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � Information processes are not recorded � Database implementations tend to filter at Database implementations tend to filter at the reporting stage whereas traditional accounting information systems have accounting information systems have tended to filter at the recording stage September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 10 10

Accounting Information Systems REA Modeling REA Modeling - - a Formal Approach a Formal Approach � Key characteristics of REA Systems * Support all critical events * St * Store a detailed history of events d t il d hi t f t * Store data in an integrated repository * Are able to retrieve and manipulate data to meet Are able to retrieve and manipulate data to meet user needs * Process events as they occur * Use directed REA design and implementation d d d d l * Prepare financial statements without journal entries and a general ledger entries and a general ledger September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 11 11

Accounting Information Systems Event Event- -Oriented Modeling Oriented Modeling � Extended REA Ontology (Gillett 2003/6): Economic Resources (R) * Significant Events * • Economic Events (E) i ( ) • Commitments (C) • Business Events – Instigation (I) – Facilitation (F) ili i ( ) – Terminal (T) Economic Agents (A) * • Internal Agents • External Agents Business Location (L) * Facilitation and Terminal events are best thought of as the beginning or end of economic events or commitments that we choose to record separately or commitments that we choose to record separately September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 12 12

Accounting Information Systems Event Event- -Oriented Modeling Oriented Modeling � Extended REA Ontology (Gillett 2003/6): Relationships * • Duality (E – E) – Transfer Transfer – Transformation • Resource-flow (E – R) – Inflow » Take » Production Production – Outflow » Use (entirely) » Consumption (in small parts) » Give • Participation (E – A) i i i ( ) – Inside » Accountability » Authorization – Outside • Site (E – L) September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 13 13

Accounting Information Systems Event Event- -Oriented Modeling Oriented Modeling � Extended REA Ontology (Gillett 2003/6): Relationships * • Linkage (R – R) – Composition: Shirts are composed of fabric thread buttons labels etc Composition: Shirts are composed of fabric, thread, buttons, labels, etc. – Substitution: White Packing Tissue substitutes for Ivory Packing Tissue • Association (A – A) – Responsibility: Managers are responsible for Secretaries – Assignment: Salespersons are assigned to Customers in their region – Cooperation: One Vendor cooperates with another Vendor • Custody (A – R) – Cashier has custody of Petty Cash • Designation (A – R) – Customer designates a new Ship Customer designates a new Ship • Certification (A – R) – Vendors certified to supply specific Inventory – Approved Vendors List September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 14 14

Accounting Information Systems Event Event- -Oriented Modeling Oriented Modeling � Extended REA Ontology (Gillett 2003/6): Relationships * • Fulfills (C – E) – Contract: Shipment fulfills the Sales Order C t t Shi t f lfill th S l O d – Schedule: Production fulfills the Job Order • Reserves (C – R) – Sales Order reserves Finished Goods • Partners (C – A) • P t (C A) – Customer partners the Sales Order • Reciprocal (C – C) – Materials Requisition is the reciprocal of the Production Order We are recording the (mutual) commitment to the (non-cash) initial event in economic exchanges; strictly, commitment events are paired in reciprocal relationships. p p September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 15 15

Accounting Information Systems Event Event- -Oriented Modeling Oriented Modeling � Extended REA Ontology (Gillett 2003/6): Relationships * • Instigates (I – C, I – E, I – F) – Requisition instigates Purchase Order q g • Facilitates (F – E, F – C) – Picking facilitates Shipping • Necessitates (E – T, C – T) – Receipt of goods necessitates Storage • Demands (I • Demands (I – R) R) – Requisition demands Inventory • Authorization (I – A) – Inventory Manager authorizes the Requisition • Involves (F – R), (T – R) ( ), ( ) – Marshals » Picking marshals Inventory • Participation (F – A), (T – A) – Inside » Accountability » Accountability September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 16 16

Accounting Information Systems Event- Event -Oriented Modeling Oriented Modeling � Economic Resource * Good, right, or service of value, under the control of a person person � Economic Event * Occurrence in time wherein ownership of an economic resource is transferred from one person to economic resource is transferred from one person to another � Economic Agent * Persons and agencies who participate in the P d i h i i i h economic events of an enterprise or who are responsible for subordinates’ participation September 30, 2009 September 30, 2009 Dr. Peter R. Gillett Dr. Peter R. Gillett 17 17