System Dynamics, A New Approach in Modeling of Accounting Events and Financial Decision Making

This paper uses the system dynamics method as a new approach in modeling of accounting events. For this purpose, firstly, by defining financial accounts in the form of state and rate variables, the effect of accounting events on each other is modeled based on the dynamics model. Then, key variables are simulated in the outlook of year 1400 using the actual data of a manufacturing company. The results of the study show that the proposed method, while modeling financial operations based on a dynamic approach, helps managers to analyze the effectiveness of variables based on dominant behavioral patterns and provides useful information for management decision making through simulating the trend of variables in future periods and simulating the future behavior of financial variables of the company, respectively. For example, the behavioral pattern of the variable Doubtful Debts is not instantaneous but is a delay element and has an exponential distribution function. Also its variations has a significant relation with sales price, return of investment and receivables variables. Therefore, any changes in receivables trend may result in changes in future behavioral pattern of sale