A pervasive theme in both accounting and statistics is aggregation. However, in contrast to statistics, a customary standard for determining the best aggregation rule in accounting is unavailable or, at least, not explicitly defined. Also, most accounting procedures follow a well-specified...

Despite the obvious problems associated with collections, firms routinely sell on credit. Conventional wisdom suggests offering credit is a necessary evil when dealing with insistent cash-constrained customers. This paper provides a more positive view of trade credit. We find that offering...

This paper adopts a valuation perspective within an asymmetric information setting and explores properties of economic income. The optimal intertemporal contract induces an accrual component of income which would not exist absent the information problem. The contracting solution introduces a...

This paper provides an explanation for why incentive contracts that are muted (compared to incentive contracts derived from standard agency models) may be effective in motivating team members. By having the team repeat a task in a second period, the explicit incentives that need to be provided...

In this paper we examine a simple but suggestive setting in which the income number arises naturally (and directly) from competitive markets. While no explicit assumptions are made about individual firm's objectives, it turns out that equilibrium is consistent with the maximization of a number...

We formally establish the link between linear algebra and the double entry bookkeeping system: the system transforms a vector of numerical values corresponding to transaction amounts to a financial statements vector through matrix multiplication. The matrix is called a generator matrix (it is...

This note represents a preliminary step in the study of accounting. Accounting serves many purposes, and it is not easy to decide where to begin ; we begin by exploring the relationship between accounting numbers and the value of a firm and its assets. Market structure affects value, and...

The purpose of this paper is to selectively review research that addresses capital budgeting decisions in settings characterized by dispersed information and incentive problems. The papers are theoretical; they formulate and analyze models that vary in the number of periods considered, the...