Question

Star Garage Limited provides motor vehicle accessories and services for a wide range of vehicles in Dominica. Customers purchase parts to take to their individual mechanics to complete vehicle repairs or they may choose to bring their vehicles to Star Garage for in-house repairs and servicing. This means that they pay for both the parts and the labour associated with the type of service required. Some services do not include any new parts, just the labour costs for that service. Individual customers must pay for all parts purchases in full at the time of sale. Individual customers must pay 50% down when they bring their vehicles in for servicing and pay the balance when they come to pick them up when the job is completed. Corporate customers, however, are billed monthly for all sales (parts or service). Although Star Garage Limited has several different banking accounts, all sales are deposited intact into its main chequing account. Star Garage Limited purchases its inventory of parts from more than a dozen different vendors. Orders are usually delivered the next day; sometimes, however, suppliers ship only partial orders. Star garage Limited pays cash for some of its purchases, but usually pays by the 8th of the month for all purchases made the prior month. None of its suppliers allows it to make installment payments.

Required:
1. Draw an integrated REA diagram for Star Garage’s Limited revenue and expenditure cycles.

2. Star Garage Limited often buys inventory after receiving a sales order from the customer. Suppose you are asked to prepare one REA diagram that combines both the sales and collection process and the purchases and payments process. What would be shared among those processes? What would be unique to each process? Why?

Answer 1

When combining the sales and collection process with the purchases and payments process, several entities are shared, while some remain unique to each process.

Shared Entities:

Customer: Represents the individuals or organizations purchasing parts or services.

Inventory: Represents the stock of parts available for sale.

Vendor: Represents the suppliers providing parts to Star Garage Limited.

Unique Entities:

Sales Order: Represents the customer's request for specific parts or services.

Sales Invoice: Represents the bill sent to the customer for purchased parts or services.

Purchase Order: Represents Star Garage's request for specific parts from a vendor.

Purchase Invoice: Represents the bill received from a vendor for purchased parts.

Cash Receipt: Represents the payment received from a customer for purchased parts or services.

Cash Payment: Represents the payment made to a vendor for purchased parts.

Shared entities like customers, inventory, and vendors play roles in both revenue and expenditure cycles. They're involved in sales/purchases regardless of the transaction type.

Unique entities, such as sales orders, invoices, and cash receipts, are specific to sales, while purchase orders, invoices, and payments are specific to purchases. They represent distinct activities within each cycle.