Inferring Transactions from Financial Statements
Abstract
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.
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Citation
Arya, A., J. Fellingham, Jonathan Glover, D. Schroeder, and Gilbert Strang. "Inferring Transactions from Financial Statements." Contemporary Accounting Research 17, no. 3 (2000): 366-385.
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