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 accounts uses time value of money concepts to value the account?

Inventory

Prepaid Expenses

Accounts Payable

Notes Receivable

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Understand the concept of time value of money (TVM), which states that money available today is worth more than the same amount in the future due to its earning potential. TVM is used in accounting to value accounts that involve future cash flows.

Identify the nature of each account listed in the problem: Inventory, Prepaid Expenses, Accounts Payable, and Notes Receivable. Determine whether they involve future cash flows or require TVM calculations.

Inventory represents goods held for sale and is valued based on cost or market value, not future cash flows. Therefore, TVM is not applicable.

Prepaid Expenses are payments made in advance for goods or services, and they are recognized as expenses over time. They do not involve future cash flows requiring TVM calculations.

Notes Receivable represents amounts owed to the company that will be received in the future, often including interest. Since it involves future cash flows and interest, TVM concepts are used to value this account.