Database Basics

• Overview of Databases

Arrivederci Pacioli

• Five primary weaknesses of traditional accounting system (debits and credits):• Focus on subset of business activities• Delay in data capture and processing• Captures limited transaction information• Duplicate data• Expensive and defensive controls

Why is understanding relational databases important?

• All modern accounting software / ERP software is supported by relational databases.

• To understand how these systems operate, you need to understand relational databases.

• Custom reports are created using query writing languages to pull information from the database. If you do not understand the databases, it is very difficult to create reports.

Motivation for“REA” Component

• Modern IS’s run on top of databases, making it important to understand how databases store and process information.

• E-R is the standard for modeling RDBMS• REA models provide an intermediate view of business

processes.– Value chain, value system, and strategy are high level

analyses– REA is intermediate level– Flowcharts are low level

00101

10-15-99

Item # Description Quantity Unit Price Extension

10 Television 2 $ 499.00 $ 998.0050 Microwave 1 449.00 449.00

$ 1,447.00

S & S Appliance Company

Total Sale

Sold To:D. Ainge123 Lotus LanePhoenix, AZ

Invoice No:

Invoice Date:

Consider the transaction captured by this source document:

00101

10-15-99

Item # Description Quantity Unit Price Extension

10 Television 2 $ 499.00 $ 998.0050 Microwave 1 449.00 449.00

$ 1,447.00

S & S Appliance Company

Total Sale

Sold To:D. Ainge123 Lotus LanePhoenix, AZ

Invoice No:

Invoice Date:

What entities are involved?

Customer # Name Address City State151 D. Ainge 123 Lotus Lane Phoenix AZ

Customer TableItem # Unit Price Description10 499 Television50 449 Microwave

Inventory Table

Invoice # Customer # Date Item # Quantity Extension101 151 10-15-99 10 2 998101 151 10-15-99 50 1 449

Sales Table

What tables are needed?

Customer # Name Address City State151 D. Ainge 123 Lotus Lane Phoenix AZ

Customer Table

Item # Unit Price Description10 499 Television50 449 Microwave

Inventory Table

Invoice # Customer # Date Item # Quantity101 151 10-15-99 10 2101 151 10-15-99 50 1

Sales Table

Is all information accounted for?

Relational Data Bases

We correct these problems by adding another table to create a “normalized” data base

Data duplication is minimizedNote the “linked” primary key in the Sales-Inventory table

Normalization example—tables

VendorVendor IDVendor NameVendor AddressDiscount PercentageDiscount Time

ItemItem numberItem descriptionItem price

PurchasePO numberPurchasing agent IDDate orderedShipping termsShipping dateVendor ID

Purchase-ItemItem numberPO numberQuantity ordered

Entity-Relationship (E-R) Modeling

• E-R Modeling is one of many ways to draw pictures of businesses.

• Other modeling choices include:– Data flow diagrams (DFD)– Flowchart

• E-R modeling is an ART—may be a bit of a stretch...it is not a science.

Entity-Relationship—(E-R) Modeling

• Entities represent– People – Places – Things – Occurrences in time (like transactions)

• Relationship– Link related entities

E-R Modeling Example

• Hospital surgery room environment• Operations are performed on patients. One doctor

performs the operation while being assisted by several nurses.

E-R Example

Nurse

Patient

Doctor

OperationOperating

Room

REA vs. E-R

• The REA framework says that the world consists solely of Resources, Events, and Agents (Locations?)

• E-R modeling is a method of drawing pictures.

REA Diagrams

McCarthy (1979, 1982) determined that business systems consist “solely” of

Resources

Events

Agents

McCarthy (1979, 1982) also identified common patterns of Resources, Events, and Agents

Resource Event

Inside

Agent

Outside

Agent

REA Diagrams

• Resource - anything under the firm’s control, that provides value and of which there is limited quantity

• Event - an occurrence that changes the quantity of a resource

• Agent - someone responsible for the event. One is from the organization (internal) the other is outside (external)

• Location - where the event occurred—sometimes included

ResourceIncrease

EventOutsideAgent

InsideAgent

ResourceDecrease

EventOutsideAgent

InsideAgent

REA “Exchange” Pattern

• Decrease events are always linked to increase events - Duality

• No “free lunch” - firms do not give up resources without receiving something

Integrated REA Diagrams

Exchange REA Diagrams are combined to create an integrated REA Diagram.

ResourceIncrease

EventOutsideAgent

InsideAgent

ResourceDecrease

EventOutsideAgent

InsideAgent

IncreaseEvent

DecreaseEvent

InsideAgent

InsideAgent

OutsideAgent

OutsideAgent

Integrated REA Diagrams

• Complete Integrated REA Diagrams include an increase event and a decrease event for each resource.

• Resources must come from somewhere• Resources must go somewhere• May choose not to model complete system.

This is a new model, new field, developing field...but the concepts are well-accepted in the database field

• UN/CEFACT (Center for Trade Facilitation)• ISO

REA Data Modeling Process

REA framework - provides conceptual model

Tables - Identify required tables and fields

Database - Build tables, establish relationships, and input data into relational database

Cardinalities

• Definition: the number of times each individual entity can participate in the relationship

• Relationships between entities determine how tables must be related...entities lead to tables

Cardinalities

• Maximums– Business process– Rules for relationships in database

• Minimums– Business process– Information for controls in database

Emergency RoomE-R Example

• Doctor - Operation: • A doctor can have many operations • An operation can have one responsible doctor

• Nurse - Operation• A nurse can have many operations• An operation can have many nurses

Steps in REA data modeling

Identify the business processes Identify the resources affected by each event and the

agents who participate in each event Combine events into the basic exchange template

Add information about cardinalities Identify magnitude of relationships

Implement Model in Relational Database: Table for each entity Table for each M:N relationship Use foreign keys for 1:1 and 1:N relationships

Develop a set of normalized tables

Queries—putting it back together

• Some query basics• Database languages...data definition, data

manipulation, data query

• Data dictionary...to see what the data look like

• Structured query language (SQL)...standardized query language with many specializations