Role of probability biclassification in accounting and finance random variable representations

Abstract

The concept of value in accounting has been generalized by various authors to a large variety of relations in both accounting and finance. For example, the basis for the preparation of the financial statements in accounting and the foundations for the determination of the return on a security in finance are based on the concept of value measurement. However, there are cases in which applications of the concept of value measurement breaks down, such as in predicting the long-run behavior of accounting and finance phenomena classified as random variables and in applying deterministic models to accounting and finance models. In this study, the principles of probability biclassification and random utility theory are used to rectify the shortcomings of generalizing the concept of value measurement to include activities to understand the long-run behavior of random variables. This study closes with a discussion on the compatibility of the intentionality structure of acts of knowledge in accounting and finance with statistical concepts on random variables.