REA Technology

What Is REA

REA (Resources, Events, Agents) is a method for modeling business processes. Unlike all other methods, the REA model reveals why business processes occur, and provides for full traceability of all business transactions. The REA model is also closer to the reality than any other business modeling method, which is very useful in model-driven design of software applications.

Figure below illustrates the most fundamental REA concepts, which are economic resource, economic agent, economic event, commitment, and contract.

Economic Resource is a thing that is scarce, and has utility for economic agents, and is something users of business applications want to plan, monitor, and control. Examples of economic resources are products and services, money, raw materials, labor, tools, and services the enterprise uses.

Economic Agent is an individual or organization capable of having control over economic resources, and transferring or receiving the control to or from other individuals or organizations. Examples of economic agents are customers, vendors, employees, and enterprises.

Economic Event represents either an increment or a decrement in the value of economic resources that are under the control of the enterprise. Some economic events occur instantaneously, such as sales of goods; some occur over time, such as rentals, labor acquisition, and provision and use of services.

Commitment is a promise or obligation of economic agents to perform an economic event in the future. For example, line items on a sales order represent commitments to sell goods.

Contract is a collection of increment and decrement commitments and terms. Under the conditions specified by the terms, a contract can create additional commitments. Thus, the contract can specify what should happen if the commitments are not fulfilled. For example, a sales order is a contract containing commitments to sell goods and to receive payments. The terms of the sales order contract can specify penalties (additional commitments) if the goods or payments have not been received as promised.

You can find more information online in the chapter What Is REA in the book Model-Driven Design Using Business Patterns.