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 of the following are common methods for calculating the time value of money?

LIFO and FIFO inventory methods

Double-entry bookkeeping

Straight-line depreciation

Present Value (PV) and Future Value (FV) calculations

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Verified step by step guidance

Understand the concept of the time value of money, which states that a dollar today is worth more than a dollar in the future due to its earning potential.

Learn the two common methods for calculating the time value of money: Present Value (PV) and Future Value (FV). These methods help determine the value of money at different points in time.

Present Value (PV) calculations involve discounting future cash flows to their value today using a discount rate. The formula is:

PV = \frac{FV}{{(1+r)}^{-n}}

, where FV is the future value, r is the discount rate, and n is the number of periods.

Future Value (FV) calculations involve compounding present money to its value in the future using an interest rate. The formula is:

FV = PV \times {(1+r)}^{n}

, where PV is the present value, r is the interest rate, and n is the number of periods.

Recognize that methods like LIFO and FIFO inventory methods, double-entry bookkeeping, and straight-line depreciation are unrelated to the time value of money. They are accounting techniques used for inventory valuation, recording transactions, and allocating asset costs, respectively.