Inferring Transactions from Financial Statements

Anil Arya; John C. Fellingham; Douglas A. Schroeder; Jonathan Glover; GILBERT STRANG; Massachusetts Institute of Technology

doi:10.1092/l0lw-nx5l-4wur-9jkl

Inferring Transactions from Financial Statements

Anil Arya¹; John C. Fellingham¹; Douglas A. Schroeder¹; Jonathan Glover²; GILBERT STRANG³; Massachusetts Institute of Technology

¹ The Ohio State University · ² Carnegie Mellon University · ³ Massachusetts Institute of Technology

Contemporary Accounting Research 2000 open access

In this paper, we embed the double entry accounting structure in a simple belief revision (estimation) problem. We ask the following question: Presented with a set of financial statements (and priors), what is the reader's “best guess” of the underlying transactions that generated these statements? Two properties of accounting information facilitate a particularly simple closed form solution to this estimation problem. First, accounting information is the outcome of a linear aggregation process. Second, the aggregation rule is double entry.

DOI: 10.1092/l0lw-nx5l-4wur-9jkl
Volume: 17 (3)
Pages: 366-385
Export: BibTeX
Sources: openalex crossref