Question

Elegant Limited sells restored classic cars. Most of its customers are private buyers who buy cars for themselves. However, some of them are investors who buy multiple cars and hold them for resale. All sales of Elegant Limited are for cash. Depict the association and cardinality for the sales of cars at Elegant Limited based on REA model. (10 marks, maximum 300 words)

Answer 1

Explanation:

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Answer 2

The "REA model" stands for the "Resource-Event-Agent" model". It is a process to intellectualise economic activities like "sales & accounting" transactions. The model is an ISO standard which ensure reliability & quality. The REA model is understood by understanding its 3-factor "R", "E", and "A".

Explanation:

• R-Resource: Resources are objects/events which are under the "jurisdiction" of an "economic agent". Economic resources comprise goods, rights, services, claims, & obligations. Therefore,  in this cae the resource is the "resorted classical cars" that are being sold by "Elegant limited".
• E-Event: It comprise transactions, circumstances, & other phenomena which  change "economic resources" from "production", "exchange", consumption, and distribution. For this case event is the transaction is the cash transaction of all sales of cars..
• A-Agency: Economic agents are "identifiable parties" that obtain, use, or "dispose" of "economic resources". Here it is Elegant Limited and its customers

Events

• Every "REA model" should include the 2 events which represent the basic “give-to- get” "economic exchange" performed in that "transaction cycle".The "give" event reduces one of the organisation’s resources. The "get" event increases a "resource".
• There are usually other events which management is interested such as "planning, controlling, & monitoring". These needs to be included in the model.
• The relevant events here comprise  take order (set resources aside, fill order, bill payment, & collect payment.) sale and receive cash. The information to calculate an "accounts receivable" balance is already there since cash receipt & the sales information is captured.
• However, what is modelled here is only the "business event" & the facts management wants to collect about the event, not the data entry process.

Resources and Agents

• The resource(s) decreased by the "give" event.
• The resource(s) that is increased by the "get" event.
• The resources which are impacted by a "commitment event".
• There will be at least one "internal agent" (employee).
• In most cases, there will be an "external agent", as well (e.g., customer or supplier) who will participate.

Cardinality of Relationships

• A cardinality is "nature" of the "relationship" between 2 entities.
• It denotes  how many "instances" of one entity can be "linked" to a "specific instance" of another entity. For instance, the "cardinality" between the event "Sales" & the agent "Customer" give answer to the question: that for each sale Elegant Limited makes, how many customers are related to that sale?
• 3 types of relationships are possible between entities. "Relationships" depend on the "maximum cardinality" on "each side of a relationship". The "maximums" in the "cardinalities" between events is one or many,& these "maximums" differ based on" business practices".
• In the cardinality between "event &resource, the "minimum cardinality" is usually one, since an event cannot take place without impacting at least one resource. The maximum cardinality is many since majority of the inventory items could be sold several times, and Elegant Limited's cash account can have several cash receipts.
• Whenever there is a series of events in the first & second event event , the minimum cardinality is also zero and since the first event occurs there is a period of time (although probably very brief) so there is zero" occurrences in the second event. Example, If an order is put first, the products (sale event) are n’t shipped to the buyer. Where items have been shipped by the company, there is no cash receipt from the buyer for a period of time, albeit short.
• The minimum cardinality between the second event and the first event is typically one, because the second event can’t occur without the first event having occurred.

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