Table of contents

1. Introduction to Accounting1h 21m
2. Transaction Analysis1h 13m
3. Accrual Accounting Concepts2h 38m
4. Merchandising Operations2h 30m
5. Inventory1h 55m
6. Internal Controls and Reporting Cash1h 16m
7. Receivables and Investments3h 8m
8. Long Lived Assets5h 1m
9. Current Liabilities2h 19m
10. Time Value of Money1h 23m
- Time Value of Money Equations
  35m
- Using Time Value of Money Tables
  47m
11. Long Term Liabilities2h 45m
12. Stockholders' Equity2h 15m
13. Statement of Cash Flows2h 24m
14. Financial Statement Analysis5h 25m
15. GAAP vs IFRS56m

10. Time Value of Money

Time Value of Money Equations

Financial Accounting

10. Time Value of Money

Time Value of Money Equations

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Multiple Choice

Which financial concept is based on the notion that a dollar paid in the future is less valuable than a dollar paid today?

Time Value of Money

Historical Cost Principle

Materiality Concept

Matching Principle

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Verified step by step guidance

Understand the concept of the Time Value of Money (TVM): This principle is based on the idea that money available today is worth more than the same amount in the future due to its potential earning capacity. This is a foundational concept in finance and accounting.

Compare the Time Value of Money to the other options: The Historical Cost Principle states that assets should be recorded at their original purchase price, the Materiality Concept focuses on the significance of financial information, and the Matching Principle ensures expenses are matched with revenues in the same period.

Recognize that the Time Value of Money is directly related to the notion of future payments being less valuable than current payments due to factors like inflation, risk, and opportunity cost.

Understand the practical applications of the Time Value of Money: It is used in discounting cash flows, calculating present and future values, and making investment decisions.

Conclude that the correct financial concept based on the notion that a dollar paid in the future is less valuable than a dollar paid today is the Time Value of Money.