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How does the time value of money have an effect on the role of an accountant? What are the key items that an accountant must understand around present and future value concepts, annuities, and compound interest?Just response each posted down below # 1 to 3Posted 1In accounting, the time value of money is important because of the principles such as cost (which is also known as the historical cost) and revenue recognition (where revenues are recognized when service is performed, even when payment has not been received). For accountants, use of the time value of money principles is important when a company is making decisions such as investing or setting budgets as this will set the term the company’s success as well. In this case accountants need know how compounded interest works, annuities, and present and future value concepts. Being the relationship between time and money, having an understanding of TVM will give the accountant an understanding of the cash in and out (flow). Compounded interest is important for accountants to know because they deal with large sums of money when it comes to business transactions. Accounts such as long-term assets or notes payable can be taken into account with these concepts.Posted 2 Hi EveryoneThe concept of time from the financial and economic point of view, establishes a difference between the value of the money received in the present and the value of the money received in the future. When the analysis of a possible investment is made, two very important concepts, time and money are always taken into account. Both people and companies must perform an analysis of the value of money over time to project and plan their investments. The concept of time from the financial and economic point of view, establishes a difference between the value of the money received in the present and the value of the money received in the future.Knowing the present value and future value of a certain amount or investment can help us to know the amount we must save to have sufficient capital in our retirement or the money we must save to apply for a mortgage. The present value of an investment is when we calculate the current value that will have a certain amount that we will receive or pay in the future, in the agreed period. The future value is the value reached by a certain capital at the end of the determined period.Posted 3 Professor and Class,Time value of money has an effect on the role of an accountant because there are different ways and times to invest money. There is future value-lump sum, ordinary annuity and annuity due and there is present value-lump sum, ordinary annuity and annuity due. For future value lump sum will be a single payment received at the beginning of the first period, ordinary annuity will be a stream of level end of period payments and annuity due will be beginning of period payments. For present value lump sum will be a single payment at the end of the last period, ordinary annuity with be end of period payments and annuity due will be beginning of period payments. So they are opposites of each other. All of this will be a factor in how much interest is earned or lost due to the way you invest.
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