Accounting Information Systems, 8e—Test Bank, Chapter 10
Chapter 10—The REA Approach to Business Process Modeling
TRUE/FALSE
1. According to the REA philosophy, information systems should support only the needs of accounting
professionals.
2. Many believe that the accounting profession should shift away from financial statement reporting
toward providing information that assists decision-making.
3. Modern managers need both financial and nonfinancial information that traditional GAAP-based
accounting systems are incapable of providing.
4. The REA model is an alternative accounting framework for modeling an organization’s critical
resources, events, and accounts.
5. In REA, resources are assets that include accounts receivable.
6. REA modeling embraces two classes of events: economic events and support events.
7. At least two REA agents participate in each an economic event.
8. The events depicted on an REA diagram are transformed into computer processes while the resources
and agents become relational database tables.
9. Under the REA approach support events may directly affect a change in resources.
10. An example of an economic event is checking customer credit prior to processing a sale.
11. The duality association in an REA diagrams signifies that each economic transaction involves two
agents.
12. A difference between ER and REA diagrams is that ER diagrams present a static picture of the
underlying business phenomena.
13. ER diagrams always label entity names in the singular noun form.
14. When modeling M:M associations, it is conventional to include link tables in the REA diagram so that
the model reflects closely the actual database.
15. Where a 1:M association exists between tables, the primary key of the 1 side is embedded in the table
of the M side.
16. The REA approach generates an information system based on a single holistic user view.
17. Four basic forms of cardinality are possible: zero or one (0,1), one and only one (1,1), one or many
(1,M), and many and only many (M,M).
18. When one side of a 1:1 association has a minimum cardinality of zero, the primary key of the table
with the 0,1 cardinality should be embedded as a foreign key in the table with the 1,1 cardinality
19. Most companies implementing an REA model also maintain a traditional general ledger system for
financial reporting.
20. Modeling economic transactions under the REA approach always includes depicting both internal and
external agents.
21. The letters ‘R,’ ‘E,’ and ‘A’ in the term “REA model” stand for resources, events, and actions.
22. A semantic data model captures the operational meaning of the user’s data and provides a concise
description of it.
23. Support events include control, planning, and management activities that directly affect a change in
resources.
24. REA resources are those things of economic value under the control of the enterprise including
physical assets and employees.
25. Value chain analysis distinguishes between primary activities and support activities.
MULTIPLE CHOICE
1. Which statement is NOT true? REA resources are:
a.
assets
b.
affected by support events
c.
scarce
d.
under the control of agents
2. The concept of duality means that a REA diagram must consist of:
a.
two events, one of them economic the other support
b.
two agents, one of them internal and the other external
c.
two resources, one increased and the other decreased by the same event
d.
none of the above
3. In a REA diagram each economic event is always
a.
linked to at least two resource entities
b.
linked to two external agents
c.
linked to another economic event
d.
linked to two internal agents
4. Which of the following are characteristics of internal agents?
a.
They participate in economic events, but do not assume control of the resources
b.
They are employees of the company whose system is being modeled
c.
They participate in economic events, but not in support events
d.
All of the above
5. Which of the following is true?
a.
REA diagram entities are arranged in constellations by entity class.
b.
ER diagrams present a static picture of the underlying business phenomena
c.
Events entity names in REA diagrams are in the verb form
d.
All of the above are true statements
6. The ‘R’ in REA stands for
a.
ratios
b.
relationships
c.
resources
d.
reserves
7. The ‘E’ in REA stands for
a.
events
b.
estimates
c.
economics
d.
entities
8. The ‘A’ in REA stands for
a.
assets
b.
apportionment
c.
allocation
d.
agents
9. Which of the following events would be least likely to be modeled in a REA diagram?
a.
customer inquires
b.
posting accounts payable
c.
receiving cash
d.
sales to a customer
10. All of the following are examples of economic events except
a.
receiving raw materials from a supplier
b.
checking a customer’s credit prior to processing a sales order
c.
disbursing cash for inventories received
d.
shipping product to a customer
11. Which types of entities are included in REA diagrams?
a.
support events
b.
economic events
c.
internal agents
d.
all of the above
12. Which of the following associations would most likely describe the relationship between an internal
agent and an economic event?
a.
1:M
b.
1:1
c.
0:M
d.
none of the above
13. Which of the following statement is correct?
a.
The REA model requires that phenomena be characterized in a manner consistent with the
development of a single user view.
b.
The REA model requires that phenomena be characterized in a manner consistent with the
development of a selected user view.
c.
The REA model requires that phenomena be characterized in a manner consistent with the
development of a unique user view.
d.
The REA model requires that phenomena be characterized in a manner consistent with the
development of a multiple user view.
14. Which of the following associations requires a separate link table?
a.
1:1
b.
1:M
c.
M:M
d.
none of the above
15. Which of the following tables would most likely have a composite key?
Accounting Information Systems, 8e—Test Bank, Chapter 10
a.
Take Order.
b.
Cash
c.
Ship Product
d.
Inventory Ship Link
16. When developing an REA model:
a.
Accounting artifacts are represented as support events
b.
The same resource is both increased and decreased by the duality association
c.
Link tables are explicitly depicted
d.
events are organized in sequence of occurrence
17. In an REA model, events are described from the perspective of
a.
the organization
b.
the designer
c.
the user
d.
the customer
18. Which of the following is NOT an example of an economic event?
a.
Ship goods
b.
Receive goods
c.
Get employee time
d.
Prepare cash disbursements voucher
19. When assigning foreign keys in a 1:M association
a.
The primary key of each table should be embedded as a foreign key in the related table
b.
The primary key on the (0,M) side of the relation should be embedded as the foreign key
on the (1,1) side.
c.
The primary key on the (1,1) side of the relation should be embedded as the foreign key on
the (0,M) side.
d.
None of the above is true
20. When assigning foreign keys in a 1:1 association:
a.
The primary key of each table should be embedded as a foreign key in the related table
b.
The primary key on the (0,1) side of the relation should be embedded as the foreign key on
the (1,1) side.
c.
The primary key on the (1,1) side of the relation should be embedded as the foreign key on
the (0,1) side.
Accounting Information Systems, 8e—Test Bank, Chapter 10
d.
None of the above is true
SHORT ANSWER
1. What is a user view?
2. What do the letters ‘R,’ ‘E,’ and ‘A’ stand for in the term “REA model”?
3. What is a semantic data model?
4. What are support events?
5. Define resources, economic events, and agents.
6. Explain the rule for assigning foreign keys in a (1:M) association?
Accounting Information Systems, 8e—Test Bank, Chapter 10
7. How does the REA model categorize events?
8. Define the value chain
9. Define duality.
10. Describe the rule for assigning foreign keys in a (1:1) association
11. Explain the relationship between cardinality and association.
12. Explain how events, resources and agents are linked in a REA diagram.
Accounting Information Systems, 8e—Test Bank, Chapter 10
13. What are the minimum number and type of event entities that an REA diagram must include?
14. Why would a company adopt the REA approach to database design?
15. Define view integration?
16. Define cardinality.
17. Define association.
18. Why are journals and ledgers not modeled in an REA diagram?
19. What are the four basic forms of cardinality?
20. How are tables in a (M:M) association physically linked?
ESSAY
1. List and explain the steps involved in preparing an REA model of a business process.
2. What is the REA model? What does it mean for accountants?
3. How does the REA approach improve efficiency?
Accounting Information Systems, 8e—Test Bank, Chapter 10
4. How do the entity relationship (ER) and the REA diagrams differ?
5. Since REA databases do not employ journals and ledgers, how can they support financial statement
reporting?
6. Explain how a sales invoice table can be used to replace traditional accounting records.
7. Explain how a Disbursement Voucher table can be used to replace traditional accounting records.
8. Discuss the limitations of transaction based systems
9. Discuss why adherence by the accounting profession to a single, GAAP-based view is inappropriate.
10. Discuss how adopting a value chain perspective reveals advantages of adopting an REA approach to
information system development.
11. Discuss the concept of duality as it relates modeling an economic transaction.