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

How does compound interest differ from simple interest?

Compound interest is calculated on both the initial principal and the accumulated interest from previous periods, while simple interest is calculated only on the initial principal.

Compound interest is calculated only at the end of the investment period, while simple interest is calculated periodically.

Simple interest increases exponentially over time, while compound interest increases linearly.

Simple interest requires interest to be reinvested, while compound interest does not.

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Verified step by step guidance

Understand the concept of simple interest: Simple interest is calculated only on the initial principal amount, and it does not take into account any interest that has been accumulated over previous periods.

Understand the concept of compound interest: Compound interest is calculated on both the initial principal and the accumulated interest from previous periods, meaning the interest is reinvested and grows over time.

Compare the calculation frequency: Simple interest is typically calculated periodically (e.g., annually, monthly), while compound interest involves reinvesting the interest and is calculated at the end of each compounding period.

Analyze the growth pattern: Simple interest grows linearly over time because it is based solely on the principal amount, whereas compound interest grows exponentially due to the reinvestment of accumulated interest.

Clarify misconceptions: Compound interest does not require interest to be reinvested manually; it is inherently reinvested as part of the calculation process, while simple interest does not involve reinvestment unless explicitly done by the investor.