Inferring Transactions from Financial Statements*

Anil Arya, John C. Fellingham, Jonathan C. Glover, Douglas A. Schroeder and Gilbert Strang

Contemporary Accounting Research, 2000, vol. 17, issue 3, 366-385

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.

Date: 2000
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https://doi.org/10.1506/L0LW-NX5L-4WUR-9JKL

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Persistent link: https://EconPapers.repec.org/RePEc:wly:coacre:v:17:y:2000:i:3:p:366-385

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