The Rea Diagram

The REA Diagram

Resources, Events, Agents (REA) is a model of how an accounting system can be re-engineered for the computer age. REA was originally proposed in 1982 by William E. McCarthy as a generalized accounting model, and contained the concepts of resources, events and agents. REA was originally proposed as a generalized accounting model. REA became the foundation for several electronic interchange standards, such as “ebXML and Open-edi (an ISO standard), which influenced the extensions of the original REA model into commitments and contracts.” (W. E. Mccarthy, July 1982)

The REA model focuses on the core economic phenomena and abstracts from technical and implementation details. This has several advantages.

Firstly, the REA model abstracts from the technical aspects of the transfer of the resources. Cash can be transferred as bills and coins, as a check or as a credit card transaction. Customers can pick pizza themselves, or pizza can be delivered to their address. For all these cases we can apply the same REA model, which does not have to be modified even if the technical infrastructure supporting the business changes.

Secondly, the REA model abstracts from the order in which the economic events occur. Usually, pizza is paid at about the same time as it is given to the customer, but sometimes it is paid for beforehand, and sometimes it can be paid by credit card and there is a significant delay between the sale of pizza and the transfer of cash. If the business process was specified as a scenario consisting of a sequence of events, the business application would support only the scenarios identified at design time. The REA model allows the business application to flexibly record everything that actually happened. The actual order of events emerges at runtime, rather than being specified at design time.

Thirdly, for each REA model apply certain rules: each increment must be related to a decrement, each economic event must have a provider and...