Time Value of Money
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case.
The time value of money is an important concept in finance. It allows comparison between future and present cash flows, helping decision makers evaluate several alternatives. Accounting also applies the time value concept.
Why this course
Accounting is a measurement activity. Time value of money is a concept but is not an accounting principle. However, many areas of accounting apply this concept in the measurement basis for certain items in the financial statements, as well as in the determination of adjustment items in some transactions. The concept and its implication on the accounting transaction should be understood. The calculation of present values is the easiest part and there are various tools available. The time value of money is an indispensable knowledge for every accountant.
What you will learn
The course is an extensive discussion of the time value of money, starting with the concepts of interest and present value. Present value components, the effect of various cash flow streams, and the impact of time and rate are explained. Other areas covered are ordinary annuity and annuity due. Present value calculation tools are discussed including formulas, present value tables, spreadsheets, and financial calculators. Spreadsheet functions for calculation of several variables are demonstrated. Applications in business and accounting are also discussed.