The importance of maintaining a proper relational database
Resources, Events and Agents (REA) a technique that teaches us how to assess and apply the concept of the available accounting information system, which is rare but a popular and useful tool in handling important data and assessing the same. It is important for every organisation and companies irrespective of their size and nature of the business should maintain and apply the concept of relational database. If the data base are not properly maintained then it would be difficult for every organisation to work effectively and efficiently. Mr Freddy should also maintain a relational database that would guide him in the due course of his business activity and the same could bring operational efficiency in his business as the internal or the backend support and operation of the company or the organisation would improve (Dunn, Gerard & Grabski, 2016).
The model bus shop should identify analyse and apply the data that are necessary for the business and that would further guide them in their due course of time (Romney & Steinbart, 2015). There are different ways and technique used and applied by every organisation in managing their key informational data but as the business and the organisation grows. It is important for the companies to maintain an proper classified and unique way of handling data so that the same can be applied and used by the companies for their long term growth and prosperity. The allocation of the data should be done in a correct way so that the shop is easily able to organize and allocate the data and the application of the same can be applied in the same way efficiently. The use of the accounting software along with the data of the company and the application of the same will bring out operational efficiency in the operations of the business. The same concepts and technique will be applied for the Mr Freddy business so that he is able to overcome challenges and difficulties faced (Mayo et al. 2015).
The relevance and the materiality of the accounting data depends on the business operations and the application of the same. The accounting data applied by the company and the applicable data of the model bus shop was not well managed as the size of the business has been in the boom stage. The current situation of the Freddy Model bus shop should be at first assessed in order to know the loopholes faced by him in the due course of his business (Murthy & Geerts, 2017). The current software does not support the Outdated Accounting Software and the inclusion of active key data. There are even problem faced by the shop in including the custom report and the revenue statement for the company as the same is done wither manually or old outdated accounting technique and tools are used for the same. For analysing and implementing with the new ideas and the use of the data software in the shop it is important firstly to organize and allocate the key areas where the problems are faced by the shop in handling of operations of the company. The company as the accounting does not properly do the revenue analysis and the assessment and the company does not maintain the classification of the revenue data correctly. It is important for the companies to maintain an proper classified and unique way of handling data so that the same can be applied and used by the companies for their long term growth and prosperity. For the assessment of the revenue and purchases of the shop, Freddy has to spend a lot of time in the analysis of the same (Kaplan & Atkinson, 2015). However, the use of the accounting data and software could allow and help him allocate the frequent and the most amount of purchased amount of quantity and the relevant data an time so that the assessment of the same is easy and accurate (Schneider et al. 2015).
Exploring the use of Resources, Events, and Agents (REA) model
The Resource, Event and Agent model was developed to better assess the business operation of the shop. The other crucial area where the shop was experiencing difficulty was the management of the internal and external agents and the key economic resources by the shop for which the relevant REA model was developed. The REA model would guide them on how to deal with the economic resources and the application of the same in the business operations of the company (Appendix1). The REA model designed for the same was divided into two parts where the economic resources and the economic event of the company is based on two main sources Inflow and the outflow section (Mittal & Vetter, 2016). Each section and the part let us know how to deal with the economic resources and the agents of the company and what are the key persons and informations that needs to be delivered to them (Berglund, 2015). The revenue process is the key and crucial part for the shop for the assessment and analysis part and the same was developed using the REA Model (Malhotra, 2015). The accounting system should be supportive in nature and the same should provide assistance to the business in the back to back to end operations of the shop. The analysis for revenue, sales order, and payment of cash receipts was included in the REA model (Appendix 1). The revenue process was divided and developed into three major parts and portion, that will help the shop allocate and divide the due course of their work, namely the key resources, Events happening in the company and the key agents of the company (Tak, Kwon & Urgaonkar, 2017). The key resources identified were the competitors’ products, the inventory of the shop and the key liquid assets of the company such as cash and cash equivalents, which is used by the company or the shop for the daily and the frequent payments. The key events for the shop were the sales order received by the company and the classification and entry of the same in the books of accounts of the company (Fayollas et al. 2015). The sale of the shop should also be recorded in the proper way as shown as soon as it moves from the inventory of the shop and the classification of the same should be done via mapping it with the agents through which the same is done. The key agents such as Sales persons or through direct consumer mapping will help them asses the revenue of the shop and keeping the record of the same. The payment of all inventory and raw materials should also be well assessed and classified as the same is paid and the relevant cash and bank balance for the same should be assessed in order to avoid duplication of payment and the same should be authorised carefully (Grandcolas et al. 2018).
Designing a good relational database for revenue cycle and expenditure cycle
Freddy should realise that classification and recording of data in a proper way and allocating and mapping it with the key resources of the company could allocate him well with the company. REA model would be enabling the company or the shop to better asses and link the possible relationship between the internal and external key factors (Heredos, Kim & Vazzano, 2017). The accounting framework and the policy of the company should be such so that the company or the sop is well able to extract the right amount of information and allocate material amount of resources for the same. Creating Division for the revenue for the company from the purchase to selling and cash receivable from the same will enable the company to better control and analyse the data without further loss of time and money in the shop. The purchase system of the shop should be classified on the basis of the units and the amount of total purchased amount and from the agent or the source from the materials are procured and purchased and the amount payable for the same (Dunbar, Laing & Wynder, 2016). The events occurred in the business of Mr Freddy shop for purchasing and selling of busses and spare parts for the same should be divided into different sections. The accounting should be managed in a different way as the purchase quantity for buses is limited but the spare parts and other automotive parts may be purchased by the shop in a large quantity. The key agents of the shop were those who were taking an active part in the daily workings of the shop from day to day activities. The creational and identification of the data base for the same is relevant as the same would further help and analyse the shop in better planning and controlling of the resources of the company. The cross events and the exchanges which are linked to the business operations like the flow of goods from inventory to purchase should be accounted in a way that matches the concept and thee policy of the company. The sales transaction is a very important part for the company and the same should be dealt whenever the sales or the cash receipt from the same is generated from the sale of good. The key resources will be the materials sold from the inventory of the company that was initially purchased from the suppliers of the company and the same would be sold to the direct consumer, which will form an event base for the company. The resources will sold either through in a direct manner or indirectly through agents and sales persons of the company (Haz?r, 2015).
The relevance and materiality of accounting data
The use of the REA model would enable the company focus on the event-based activities and look ahead of the traditional accounting model with the modern accounting concepts and the usage of the software and tools could be well assessed by the shop. The model developed for the shop should be simple and not complex where the allocation and the mapping of every key resources for the company will be dependent on the daily operating factors of the business (Nguyen & Pham, 2016). The inventory record for the shop should be classified based on quantity purchased, amount of purchased quantity and a remarks column that would include key informations included in the model. The database to be used in the accounting software should be well asserted and linked to the workings of the company and should well asses and support the management of the shop. There are different revenue cycle for Freddy shop and accordingly match with the work culture for the same should match with the working principle of the shop (Groomer & Murthy, 2018). The Figure 1 made for Freddy Business shows the relationship between the REA models and the possible application of the same in the business of the Freddy Shop. There are several parts included in the REA model, which has given the outlay of the stock flow for the shop on how to deal with the inflow and outflow of stocks if the economic resources of the entity increases or decreases at the same time. The creation of the dual relationship between the economic resources and the events of the company can be linked in the form of the sale done by the company and the recipient of the cash at the same time can be the best source for the creation of the dual relationship between the companies. The relationship between the internal and the external agent of the company is also dependent on the economic event occurring and taking place in the shop. The mapping of all the above key events and points mentioned will give a crucial guidance for the management of the company for decision making and effective strategy building for other aspect of their works (Perry & Harvey, 2016). The REA framework should be used as a database and the guidance for the management in the distribution of the work and deciding upon the economic resources and the simultaneous events that would take part in the same.
Benefits of using the REA model
The three important data structure and the main factors of the REA accounting tool are the orientation structure of the data, the semantic orientation or the origination of the data and the orientation of the database for the REA model (Al-Sayyed, 2015). The same can be applied and the application of the same for comparing and contrasting the accounting models of the shop. The database orientation is the main part for developing the REA accounting framework where data must be stored for a specific period and the same could be used for analysing the various decisions taken by the management of the company (Wongsim & Hongsakon, 2015). Semantic Orientation of data is also very important for the organisations as key and crucial data that helps the management in the effective decisions process should only be compared. The Figure 2 used in the REA accounting model shows the accounting structure and the infrastructure of the key factors and other crucial parts that are to be included (Hassan, Nasir & Khairudin, 2017). The accounting set of data is classified and recorded as per the economic events and the application of the resources at the same time. For example recording of sales data and the same amount of quantity been reduced from the inventory level would enable better assessment and classification of resources.
The expenditure cycle for the Freddy Shop for the management of the shop was well assed above where the payment made by the shop should be assessed and crosschecked. The payment made by the Freddy shop for the purchases should be authorized and crosschecked by key personnel’s of the shop. The REA accounting model developed will guide the shop for the key economic resources and the key economic activity linked for the same (Prasad & Green, 2015).
Conclusion
The key accounting information with the application and the usage of the REA accounting model was the part of analysis that was taken into analysis. The REA accounting model developed for the Freddy shop will help them guide in their business operations and would also bring out operational efficiency in the company if the mapping of the economic resources along with the key economic events are done for the company. The Resource, Event and Agent model was developed to better assess the business operation of the shop. The revenue management and the inventory management of the company could be well handled and tackled if the shop follows the prescribed way of accounting model given. The division and the distribution of the data and the allocation of the crucial data with the key accounting process of the company or the shop will help analyse the company’s key point in the managerial point of decision-making. The inflow and outflow of the resources of the company should be assessed so that the different sections and parts of the company is well tackled and managed for the key decision-making by the management of the company. The key crucial areas identified was the rising business for the shop and inability and lack of support from the backend operation from the shop in the availability of the relevant data and information needed for the daily activity. The same was also given a proper resolution when the management could map the same and take proper record for the same. However, it is crucial to note that the management of the company should maintain a proper database and the materiality of the same should be well assessed so that the same can be stored in a more classified way so that the same can be reused whenever the need for the same arises again. The shop should also understand the various accounting framework used and applied and adjust the same with the modern accounting techniques so that the same can be useful for the shop. The different accounting information data and the crucial data for the various components of the business will help the company take key and crucial management decision, which will help the long-term growth and prosperity of the shop.
Reference
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