Question

In: Accounting

Explain how cardinality is used as a control in the REA model.

Explain how cardinality is used as a control in the REA model.

Solutions

Expert Solution

REA is an approach to database design meant to
overcome problems with traditional approaches:
– formalized data modeling and design of IS
– use of centralized database
– use of relational database structure
– collects detailed financial and non-financial data
– supports accounting and non-accounting
analysis
– supports multiple user views
– supports enterprise-wide planning.

The REA data model was developed specifically
for use in designing accounting information
systems.
– Focuses on business semantics underlying an
organization’s value chain activities.
– Provides guidance for:
• Identifying the entities to be included in a database.
• Structuring the relationships among the entities.

A cardinality describes the nature of the
relationship between two entities.
– It indicates how many instances of one entity can be
linked to a specific instance of another entity.

Each organization will have its own unique
REA diagram.
• Business practices differ across companies, so
cardinalities and relationships will differ.
• A given organization can change business
practices, leading to a change in its REA diagram:
– A change in practice could cause a change in
cardinalities.
– Could even lead to the inclusion of different entities on
the diagram.


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