The Accounting System As an Information Function

Butterworth, John E.

doi:10.2307/2490216

Cited by 60 publications

(30 citation statements)

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“…As an example, Ijiri 33 introduced a vectorial formulation of accounting. In the same way, Mattessich 34 applied system theory to accounting, and, finally, Willett 30,35 and Butterworth 29 proposed an axiomatic theory of accounting measurement.…”

Section: Resultsmentioning

confidence: 99%

The accounting system as an algebraic automaton

Rambaud

Pérez

2005

Int. J. Intell. Syst.

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This article aims to present a mathematical model to describe the accounting system. In effect, in the literature on accounting we can find several mathematical models trying to introduce the accounting mechanics but in this article we use the concept of algebraic automaton, which has been successfully used in other economic fields, like finance. Thus, from this new point of view we can construct all definitions and accounting techniques as a particular case of the concept of automaton.

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Section: Resultsmentioning

confidence: 99%

The accounting system as an algebraic automaton

Rambaud

Pérez

2005

Int. J. Intell. Syst.

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“…7 All of our qualitative results throughout the study still hold if we assume the terminal cash ‡ow is z( ; I1) = 2 p I1 + "z, where "z is a white noise independent of any other variables. 8 This assumes the pro…tabilities of the two projects are uncorrelated. However, all qualitative results in the paper remain the same as long as is not su¢ ciently correlated with .…”

Section: Cash Flowsmentioning

confidence: 99%

“…Dye and Sridhar (2004a) focus on accounting aggregation and the resulting trade-o¤ between relevance and reliability. Along a similar line, Liang and Wen (2007) focus on 5 There was an older literature on accounting properties such as its axiomatic structure (Mattessich 1964), algebraic representation (Butterworth 1972), objectivity and reliability (Ijiri 1975), and relevance and timeliness (Feltham 1972). This area remains less-explored; Professor Ron Dye attributed the lack of progress partially to Demski's (1973) "General Impossibility" observation "that Blackwell's (1951) theorem, as applied to accounting, indicates that in evaluating two non-comparable accounting information systems, one can always …nd a pair of decisions problems in which one information system is preferred for one decision problem and the other is preferred for the second decision problem" (page 52 in Dye 2002).…”

Section: Introductionmentioning

confidence: 99%

Accounting for Past and Future Actions

Liang

Wen

2012

SSRN Journal

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Explicitly or not, an accounting measurement system must choose whether or not to exclude, from its scope consideration, any economic activities yet to occur. We provide a model where such a scope distinction between measurements has both accounting and economic meanings. In particular, we represent measurements limited to past actions with an assets-in-place (AIP) accounting measurement in contrast to a Full accounting measurement which represents measurements anticipating future actions. We then embed the accounting model into a …rm's accounting choice problem in which the …rm rationally recognizes that its accounting choice may change its own investment e¢ ciency as well as the risk premium in its share price. We analyze how the optimal choice between the two measurements depends on the investment environment (e.g., growth opportunities) as well as the inherent measurement characteristics (e.g., measurement noise). We show the optimal choice can be subtle if the …rm's investment is endogenous to the accounting regime itself. For example, Full accounting may be preferable even if the noise in Full accounting is high in some cases. Similarly, AIP accounting may become preferable even if the …rm-growth may be sizeable. The underlying driving force is that the endogenous investment makes endogenous the total uncertainty of the …rm's cash ‡ows as well as the resolution of the uncertainty due to the accounting report. This indirect e¤ect of accounting measurement (i.e., the "real e¤ect" via the investment channel) changes the trade-o¤ the …rm faces in choosing a preferred accounting measurement.

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“…Ijiri (1966) introduced a rectangular matrix in an accounting context. Butterworth (1972) used a matrix representation of double-entry accounting and extended this to value of information assessment using the economics of information. Shank (1972), in turn, stressed a more computational use of matrix algebra in accounting.…”

Section: Information ''Threads''mentioning

confidence: 99%