Explain how to do time value and money calculations.
Explain how to do time value and money calculations.
Time value of money: The time value of money is the concept states that. the money received today is worth more than the money received in the future. It is also called as present value (PV) of money.
Time value of money denotes the interest in a lending or borrowing transaction. In a lending transaction, interest is charged for lending money for a certain period of time. This interest component is the time value of money.
Time value of money also refers to inflation which tends to devalue money. Due to inflation, the value of money depreciates over period of time. Therefore, the inflation like interest might be described as the time value of money. For an instalment note liability, a series of payments are to be made to the lender by the borrower. In order to decide the instalment amount both the interest rate and the period of lending are considered. The time value of money is used for accounting the instalment note liability transactions. In the borrower's book, the present value of the instalment note liability is entered as note payable against the purchased asset.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps with 1 images
