The REA Template There is a minimum of 120 characters required to post and earn points

The following are the three fundamental rules of the basic REA template and the rationale behind following them:

1. Rule 1: Link every event entity to at least one resource entity. This rule is to be followed because the events affect the quantity of resources. And they may either increase or decrease the quantity of a resource. The event that increases the quantity of a resource is called as “get” event. A “give” event decreases the quantity of a resource. Thus the relationships between the event and resource affect the quantity of a resource. This will enable the organizations to track the effects of commitments for better planning and delivering better services.
2. Rule 2: link every event entity to at least one other event entity.  When give and get events are linked together there will be economic duality relationship. Because every organizations activities involve using the resources and expecting other resources in return. Every accounting cycle has this give-to-get economic duality relationship. In Revenue cycle: Give goods or services and get cash. Expenditure cycle: Get goods or services and give cash. Financing Cycle: Give cash; get cash. Human Resources/Payroll Cycle: give cash; Get labor. Production cycle: Use resources and get finished goods.
3. Rule 3: link every event entity to at least two participating agents. The third rule is to link each event to at least two participating agents. This will help the organizations to track the commitments of the employees with outside parties. Thus rule 3 helps in tracking and ensuring accountability.