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[Solved] Economic Agents in Rea Model

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[Solved] Economic Agents in Rea Model

Economic Agents in Rea Model

An agent in the REA model is a person, organizational unit, or
organization that performs a role in an event by having or being capable
of having control over economic resources, and transferring or
receiving the control to or from other individuals or organizations..
There are two types of agents: the outside agent and the inside agent.
Note that this is more a matter of an agent being on each side of an
event as opposed to being inside or outside of an enterprise. Also note
that the designation as an inside agent does not necessarily preclude
the agent from being considered an outside agent in another situation.

Economic Agents in Rea Model


Economic agent is among the REA model fundamental concepts, which are present in nearly all business software applications (Abramowicz & Tolksdorf, 2010). Having an understanding of this concept facilitates designing business applications, ensuring domain rules are not violated as well as adapting applications with the changing requirements without necessarily having to change the entire architecture. The economic agent is an organization with capability of controlling economic resources and receiving or transferring this control from or to the other organizations or individuals. These agents are either inside or outside. There is a participation relationship cross cut between an inside economic agent, event and outsider agent.

Inside Agents

The inside agents are mainly employees who are accountable for the entity’s economic events. The inside agents are usually in the control of the enterprise. In its capacity, an enterprise serves as the economic agent that forms the perspective for creating REA model (Abramowicz & Tolksdorf, 2010). The inside agents are at the centre of enterprise resources. When they want to increase the value of resources that is under their control, they will have to decrease value of other resources. In order to facilitate increment or decrease of value of the resources, an enterprise through the inside economic agents it has to undertake either conversion or by exchange.

Conversion refers to the process in which an enterprise consumes or uses in order to modify or produce new resources. On the other hand, exchange is the process through which the enterprise receives economic resources from the other economic agents and it provides the obtained resources to the other economic agents. In REA software applications, inside economic agents derives accounting artefacts such as ledgers, journals, credit, debit, account balance from the data that describes conversion,and exchange (Bertino & Urban, 2014).Other examples of the internal agents include such people as clerks. Sells persons and supervisors.

Outside Agents

Outside agents are the external parties, which are usually involved with the exchange of economic resources. These parties include vendors and customers. Vendors can bring the raw material to the enterprise. In this case, the enterprise will have to decrease its resources (financial resources) in order to acquire the raw materials (Jeusfeld & Pastor, 2013). The vendors can also be supplying the produced resources from the enterprise. In this case, they will be giving the financial resources in exchange for the delivered goods. The organization will have to convert the raw materials obtained from the vendors and then exchange it either directly to the customer or through the intermediary vendor. In this case, the vendor and the customer will be on the same side of the exchange in as far as the enterprise is concerned (Hall, 2013).

Considering the exchange transaction the outside economic agent is the one that transfers the resources while the inside agent is the one receiving it. If a transaction in which resources are transferredoccurs between two units within a business the external (outside) agent will be the unit that giving up the resourceswhile the internal agent (inside) agent is the one that will be receiving the resources (Medeiros et al, 2011). Identifications of individuals who are responsible for each transaction facilitates controlling the economic resources. The outside agents will be organizations or the individuals that will be interacting withthe enterprise or entity that is been modelled. The REA model can also be used to document the reason behind exchange of resources between the firm and the outside agents.



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