Accounting Information Systems Basic

Concepts and Current Issues 4th

Edition Hurt Solutions Manual
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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

1. Reading review questions

a. What are the similarities and differences between view-driven and event-driven
accounting information systems? Both types of systems can involve information
technology, although the specific technologies involved are different. In fact, most
event-driven systems require some form of relational databases due to their complexity.
In addition, both system types are capable of producing the general purpose financial
statements. Event-driven system are capable of producing many other types of reports
as well.

b. What does the acronym REA stand for? Give examples of each element. “R”
stands for Resources, such as inventory and equipment. “E” stands for Event, such as
“pay employees” or “purchase inventory.” “A” stands for Agent, such as a customer or
employee.

c. List the six steps for creating a REA model. 1. Understand the organization’s
environment and objectives. 2. Review the business process and identify the
strategically significant operating events. 3. Analyze each strategically significant
operating event to identify its resources and agents. 4. Identify the relevant behaviors,
characteristics and attributes of the REA model elements. 5. Identify and document the
direct relationships between elements of the REA model. 6. Validate the REA model
with business people.

d. Explain how to establish a set of cardinalities between two elements of a REA

model. Establishing a set of cardinalities involves asking four questions. If the
elements are denoted by “x” and “y,” the four questions are: 1. For each X, what is the
minimum number of Y involved? 2. For each X, what is the maximum number of Y
involved? 3. For each Y, what is the minimum number of X involved? 4. For each Y,
what is the maximum number of X involved? Answers to those questions commonly
include 0, 1 and many (denoted with an asterisk). The answers to the first two
questions are placed on the Y side of the relationship; the answers to the other two, on
the X side.

e. How would you use a REA model to design a relational database? In general,
each box in a REA model requires at least one table. If the maximum relationships
between two elements of the model are one and many, the primary key of the “one side”
must be included as a foreign key on the “many” side. If the maximums are both many,
a junction table is required.

f. Prepare a response to the questions for this chapter’s “AIS in the Business
World.” As in previous editions, I’ve posted responses to each chapter’s AIS in the
Business World on my accounting information systems blog
(www.bobhurtais.blogspot.com). Look for the 4th edition’s responses in the 15
December 2014 post.

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

2. Reading review problem

a. Which systems documentation technique would you use if your goal was to
construct the relational database that supports the narrative? Why? The best
documentation technique for database design is REA modeling. A properly constructed
REA model gives clear guidance when it comes to creating normalized database tables.

b. Regardless of your answer to (a), construct a complete REA model of the

process.

c. Based on your REA model, identify four tables you would need in the relational
database—one each for a resource, an event, an agent and a junction table. What
would be each table’s primary key?
• No resource table is required.
• Event table: Create Account. Primary key: Account number.
• Agent table: Customer. Primary key: Customer ID.
• Junction table: Customer / use miles. Primary key: Customer ID, Use miles
transaction number.

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

d. Based on the tables you created, suggest two queries the airline might create.
For each query, indicate its name, its purpose and the fields involved.

• Query 1: Customers that have not created an account. Fields: Customer ID,
Account number. (The latter would be ‘null’ in the query to select customers
without an account.)
• Query 2: To calculate a customer’s mileage balance. Fields: Customer ID,
miles earned, miles used. The query would need a calculated field to determine
the balance.

3. Multiple choice review questions. Answers to all of these questions appear at the
end of the textbook itself.

4. Making choices and exercising judgment

Students’ answers may vary significantly since the point of these exercises is for them
to think critically.

5. Field exercises
Answers to these exercises will vary significantly. Although I’m not providing solutions
to them, don’t hesitate to share your students’ work with me if they come up with an
especially strong response.

6. Constructing REA models

a. Tom’s Trailers

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

Here, “inventory” refers

to a specific trailer. (1,*)
Greet customer

(1,1) (1,1)
(1,*)
(1,1)
(0,1)
(1,1) Customer
(1,1)
(1,*)
(1,*) Show trailers (1,1)

(1,*)
(1,*) (1,*)

(0,1)
(0,*)
Inventory (0,1) (1,1)
(1,1) (1,1)
Sell trailer
(1,*) (1,1)
(1,1) Salesperson

(1,1) (1,1)

(1,*)
(1,1)
(1,*) (0,1) Bank
(1,*) Receive
payment (1,*)
(1,1)
Cash
(1,1)
(1,1)
Delivery person
(1,1) (1,1) (1,*)

Deliver trailer
(1,*)

The database would include at least the following tables (primary keys are underlined,
foreign keys are in brackets):
Inventory table: Identification number, make, model, year, date acquired,
purchase price.
Cash table: Cash account number, beginning balance, beginning balance date,
bank.
Greet customer table: [Customer ID], [Salesperson ID], date
Show trailers table: Show transaction #, [Customer ID], date, [Salesperson ID]
Sales table: Sales transaction #, transaction date, [inventory identification
number], [salesperson ID], [customer ID], type of sale (cash or installment)
Receive payment table: Receipt #, [sales transaction #], date, amount received,
source (bank or customer), [salesperson ID], [customer ID], [cash account
number]
Delivery table: [Sales transaction #], [delivery person ID], delivery date
Show trailers / inventory table: [Show transaction #], [inventory ID number],
[salesperson ID], [customer ID]

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

Customer table: Customer ID, last name, first name, address, city, state, ZIP,
area code, phone, date of first visit, date of first purchase
Salesperson table: : Salesperson ID, last name, first name, address, city, state,
ZIP, area code, phone, emergency contact information, date employed

b. Maple Bluff Pharmacy

Fill (1,*)
(0,*) prescription
(1,1)
(1,*) (1,*) Pharmacist

(1,1) (1,1)
(1,1)
Drugs Receive (1,*) (1,1)
payment Customer
(1,*) (0,*)
(1,*)

(1,1) (1,1)
(0,*) (2,2)
(1,1) Reconcile Pharmacy
cash employees
(1,1)
Cash (1,1)

(1,1) (1,1) (0,*)

(1,*) (1,1)
(1,1) Deposit Deposits
cash Express

Drugs table: Drug code, drug name, dosage, instructions

Cash table: Cash account number, beginning balance, beginning balance date,
bank.
Fill prescription table: Prescription #, [drug code], [customer ID], date, [payment
ID]
Receive payment table: Payment ID, [customer ID], [employee ID], date, form of
payment, amount received
Reconcile cash table: Date, [employee ID #1], [employee ID #2], total cash
Deposit cash table: Date, [employee ID], [Deposits Express ID], total cash
Employee table: Employee ID, last name, first name, address, city, state, zip,
area code, phone, emergency contact, job title, date employed (Note: I’ve
combined the “pharmacist” and “pharmacy employees” into a single table

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

here. Since the narrative implies only one pharmacist, it seemed inefficient
to create a separate “pharmacist” table. Pharmacists are differentiated
from other employees via the “job title” field.)
Customer table: Customer ID, last name, first name, address, city, state, ZIP,
area code, phone, date of first visit, medication allergies, primary doctor,
insurance
Deposits Express table: contact name, address, phone

c. Western Steel Company

(1,1)
(0,*) Receive (0,*) (1,1)
customer (1,1)
order Employees
(1,*) (1,1)
(1,1) (1,1)
(1,1)
(0,*)
Check
credit
(1,*) (1,*)
(1,1)
(1,1) (1,1)
Inventory
(1,*) (0,1) Customer
(1,*) (1,1)
(0,*)
Fill order
(1,1) (1,*) (0,*) (1,1) (1,1)

(1,1)
(1,1)
(1,1) (1,*)
(0,*)
Price list Ship order (0,*)

(1,1)
(1,1)
(1,1) (1,*)

(1,*) Invoice (0,*)

customer

(1,*)
(1,1)
(1,*) (1,1) Bank
Receive
payment
notice

Inventory table: Inventory ID, description, beginning quantity, beginning date,

average unit cost of beginning inventory
Price list table: [Inventory ID], price
Receive customer order table: Order ID, [employee ID], [customer ID], date

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

Receive order / inventory table: [Order ID], [Inventory ID], quantity ordered
Check credit table: [Order ID], [employee ID], credit decision (yes / no)
Fill order table: [Order ID], [employee ID], [customer ID], date
Fill order / inventory table: [Order ID], [Inventory ID], quantity filled
Ship order table: [Order ID], [customer ID], [employee ID], date shipped
Ship order / inventory table: [Order ID], [Inventory ID], quantity shipped
Invoice customer table: Invoice number, [Order ID], [customer ID], [employee ID],
invoice date, payment notice date

d. CPA firm payroll process

(1,*)
Submit
hours
(1,*) (1,1)
(1,1)
Auditors
(1,1) (1,1)
(1,*)
Compare
(1,1) actual & (1,*) (1,1)
budget
(1,1) Audit
Audit plan (1,1)
superviso
r
(1,1) (1,*)
(1,*) (1,1)
Prepare &
issue Payroll
checks staff

Submit hours table: Transaction number, date submitted, [auditor ID], task,
number of hours
Compare actual & budget table: [Transaction number], comparison date, audit
plan ID, [supervisor ID]
Audit plan table: Audit plan ID, client ID, audit task, budgeted task hours (Each
audit would involve multiple audit tasks. But, the # of tasks would be fixed;

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Accounting Information Systems: Basic Concepts and Current Issues (4th edition)
Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

therefore, a database designer would know how many “audit task” fields to
include in this table. If a particular task was not included in an audit, its
number of budgeted hours would be zero.)
Prepare & issue checks table: Check number, date prepared, [payroll staff ID],
[auditor ID]
Auditors table: Auditor ID, last name, first name, address, city, state, ZIP, area
code, phone, billing rate, withholding status, withholding allowances
Audit supervisors table: fields would be similar to the “auditors” table
Payroll staff table: fields would be similar to the “auditors” table

e. Textbook ordering and purchasing process

(1,*) (1,1)
(1,*) Collect
(1,*) Instructors
order data

(1,1)
(1,1)
(1,1)

Prepare (0,*) Secretary

(1,*) (1,*)
purchase
order
Textbooks (1,*)
(1,1) (1,*)
(1,1) (1,1)

(1,*) Bookstore
Receive (0,*) (1,1)
books staff
(1,*) (1,1)
(1,*)
(1,1)
(1,1) (1,1)
(1,1) (0,*)
Publisher
(1,*) (1,1)
Pay invoice

For the sake of simplicity, this solution assumes that the bookstore does
not receive partial shipments, nor does it pay for partial receipts.

Textbooks table: Textbook ID, title, author, copyright, publisher

Collect order data table: Order ID, [instructor ID], [secretary ID], date

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Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

Textbook / collect order data table: [Textbook ID], [Order ID], class, quantity

Prepare purchase order table: Purchase order #, [bookstore staff ID], [publisher
ID], date, [Order ID]

Prepare purchase order / textbook table: [Purchase order #], [textbook ID],
quantity ordered

Receive books table: Receiving transaction #, [bookstore staff ID], [publisher ID],
date

Receive books / textbook table: [Receiving transaction #], [Textbook ID], quantity
received

Pay invoice table: Transaction #, [publisher ID], [bookstore staff ID], date,
amount, [receiving transaction #]

Agent tables would be similar to those found in other exercises.

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Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

f. Beta Alpha Psi

Initiate new members table: Initiation event ID, Initiation date, Initiation place
Initiate new members / Chapter members table: [Initiation event ID], [Chapter
member ID]
Points table: Event type ID, points available

The other events would be similar to the “initiate new members” table. The
“chapter members” table would be similar to other agent tables presented
previously. And, the remaining junction table (host events / chapter members)
would be similar to the junction table presented above.

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End-of-chapter solutions
Chapter 8: REA modeling

7. Interpreting a REA model

A pet owner calls the grooming salon to make an appointment for a pet; a grooming
salon employee assists the customer. A member of the grooming staff grooms the pet.

8. Terminology
1. J 6. A

2. E 7. F

3. I 8. C

4. D 9. G

5. H 10. B

9. Multiple choice questions

1. D
2. A
3. B
4. C
5. D

10. Statement evaluation

a. Never true

b. Always true

c. Always true

d. Sometimes true. DFDs and flowcharts may be unnecessary, depending upon

the task at hand.

e. Always true

f. Never true.

g. Sometimes true If resources and agents have a relationship independent of

an event, they may be related.

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Dr. Bob Hurt, C.F.E.
End-of-chapter solutions
Chapter 8: REA modeling

h. Sometimes true Some internal controls, such as adequate documentation,

are not represented in a REA model. Separation of duties can be represented if
it exists.

i. Always true

j. Sometimes true View-driven systems provide information for decisions based

on the general-purpose financial statements; they do not, however, provide
information for other kinds of decisions.

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Dr. Bob Hurt, C.F.E.
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Chapter 8: REA modeling

11. Excel application

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