Acc 421 Week 5 Reflection
Week Five Team Reflection
ACC 421
2014
Team B
Week Five Reflection This week learning team “B” has discussed the concept of time value of money. One will be able to understand the importance of time value of money, the different ways to compute interest, information about present value and future value, and the how time value relates to accounting.
Importance of Time Value of Money
Time value of money deals with the relationship between money and time (Kieso, Weygandt, & Warfield). A dollar received today is worth more than a dollar received 10 years in the future. This is because a person can invest that one-dollar and gains interest for those 10 years. This means that exact dollar is worth more in …show more content…
It allows accounting departments to determine the value of investments and financing options. Investopedia.com defines future value (FV) as “the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today” (Investopedia.com). This definition states that accounting departments can determine how much money they will earn on an investment made today. Simple and compounded interest help determine future value. The company can determine the amount of interest they will receive over a specific period and also determine if the investment is the correct for them. Determining the amount of return on investment is important to many companies in the statement of cash flows and can increase the numbers for the balance sheet with a favorable …show more content…
Time value of money explains the value of money today is more, less, or the same in the future. An example would be $1 today may be worth $0.75 or $1.75 in the future. Future values help companies determine how much money invested today is worth in the future, and how much dividends will be worth. This is important to the companies to determine how to plan for the future. Present values determine how much a given amount of money in the future is valued at today. An example would be dividends. A company will use this to know how much money they will need to have to pay dividends to stockholders and still be able to conduct business as usual.
In conclusion time value of money is not only important within the accounting industry but is also widely used within every facet of accounting. Businesses must understand how interest is computed either simple interest or compounded. Business must also understand the difference between future and present value of money. By understanding these concepts of time value of money, the business can make the best decisions
ACC 421
2014
Team B
Week Five Reflection This week learning team “B” has discussed the concept of time value of money. One will be able to understand the importance of time value of money, the different ways to compute interest, information about present value and future value, and the how time value relates to accounting.
Importance of Time Value of Money
Time value of money deals with the relationship between money and time (Kieso, Weygandt, & Warfield). A dollar received today is worth more than a dollar received 10 years in the future. This is because a person can invest that one-dollar and gains interest for those 10 years. This means that exact dollar is worth more in …show more content…
It allows accounting departments to determine the value of investments and financing options. Investopedia.com defines future value (FV) as “the value of an asset or cash at a specified date in the future that is equivalent in value to a specified sum today” (Investopedia.com). This definition states that accounting departments can determine how much money they will earn on an investment made today. Simple and compounded interest help determine future value. The company can determine the amount of interest they will receive over a specific period and also determine if the investment is the correct for them. Determining the amount of return on investment is important to many companies in the statement of cash flows and can increase the numbers for the balance sheet with a favorable …show more content…
Time value of money explains the value of money today is more, less, or the same in the future. An example would be $1 today may be worth $0.75 or $1.75 in the future. Future values help companies determine how much money invested today is worth in the future, and how much dividends will be worth. This is important to the companies to determine how to plan for the future. Present values determine how much a given amount of money in the future is valued at today. An example would be dividends. A company will use this to know how much money they will need to have to pay dividends to stockholders and still be able to conduct business as usual.
In conclusion time value of money is not only important within the accounting industry but is also widely used within every facet of accounting. Businesses must understand how interest is computed either simple interest or compounded. Business must also understand the difference between future and present value of money. By understanding these concepts of time value of money, the business can make the best decisions