Week 3 - Chapter 17 Question 1: What is the time value of...

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Chapter 17 Question 1: What is the time value of money? Why should accountants have an understanding of compound interest, annuities, and present value concepts? Money on hand at the present time is worth more than the same amount in the future because of its potential earning capacity. The time value of money is the value of money figuring in a given amount of interest earned over a given amount of time. This core principle of finance holds that, provided money can earn interest, any amount of money is worth more the sooner it is received. http://www.investopedia.com/terms/t/timevalueofmoney.asp Accountants should have an understanding that way they can determine a company’s income or how much they have to pay out Question 26: What are the main distinctions between a traditional financial instrument and a derivative financial instrument? Temporary versus Permanent differences. Many items create differences between accounting profit and taxable income. These differences can be divided into two types. Permanent differences do not cause deferred tax liabilities or assets. They occur if a revenue or expense item: is recognized for tax reporting but never for financial reporting; or is recognized for financial reporting but never for tax reporting. Permanent differences result from revenues and expenses that are reportable on either tax returns or in financial statements but not both. Permanent differences occur because the tax code excludes certain revenues from taxation and limits the deductibility of certain expenses. Temporary differences
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This note was uploaded on 04/17/2011 for the course ACCOUNTING 490 taught by Professor Santos during the Spring '11 term at University of Phoenix.

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Week 3 - Chapter 17 Question 1: What is the time value of...

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