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12 CHAPTER 1 BUSINESS PROCESSES, DATA MODELING, AND INFORMATION SYSTEMS

Jesse
I
I
I. ••1
Inventory Sale

Customer

Cash
(Bank Cash Receipt
Account)
(0, N)

FIGURE 1-16 Complete REA Diagram for Cherokee's Revenue Cycle

denoted in a dotted-line box that means he is the only person conducting the sale transac-
tions; thus, we do not need to track information about him. In addition, in the REA dia-
gram, we need to illustrate each entity only once. Therefore, we do not need to show two
rectangles for the "Customer" entity and "Jesse."

Cherokee's Expenditure Cycle Jesse does not pay the artist or seller of antiques
until he sells the piece. Most of the artists and sellers know him very well and are willing
to wait for Jesse to sell their pieces. In general, Jesse pays them once each week for the
sales made that week. Each purchase may include several items from a single artist. Jesse
always writes a check to pay each artist or seller when he successfully sells the art and/or
antique piece(s).

Model the Expenditure Cycle Using REA To model business processes in
the expenditure cycle for Cherokee, we first identify economic exchange events in the
cycle. Recall that in Figure 1-2 there are two basic events for any expenditure cycle:
"Purchase" and "Cash Disbursement." According to the descriptions stated in the previous
paragraph, we can see that these two events are proper for Cherokee. Therefore, the par-
tial REA diagram in Figure 1-17 can be drawn.
The second step is to identify the resources affected by each economic event and
the agents who participate in those events. For the "Purchase" event, inventories of art
and antiques are purchased, and the participating agents are the artist/seller and Jesse. For
the "Cash Disbursement"oevent, Jesse pays each artist/seller in full after he sells the inven-
tory. The REA diagram in Figure 1-18 shows the basic business model for Cherokee's
expenditure cycle.