Lecture Intermediate accounting (Volume 1, 11th Canadian edition) – Chapter Appendix 3: The accounting information system and measurement issues. After studying Appendix 3, you should be able to: Prepare a 10-column work sheet and financial statements, understand and apply present value concepts. | 1 CHAPTER 3: THE ACCOUNTING INFORMATION SYSTEM AND MEASUREMENT ISSUES 2 2 After studying Appendix 3A, you should be able to: Prepare a 10-column work sheet and financial statements. After studying Appendix 3B, you should be able to: Understand and apply present value concepts. 3 Chapter 3: THE ACCOUNTING INFORMATION SYSTEM AND MEASUREMENT ISSUES 3 The Accounting Information System and Measurement Issues 4 4 Appendix 3A: Using a Work Sheet 5 Companies often use a work sheet to make the financial statement preparation process easier. Does not replace the financial statements Completing the worksheet gives certainty that all of the details have been captured in the end-of-period financial statements. 5 Appendix 3A: Using a Work Sheet 6 6 Appendix 3B: Present Value Concepts 7 The value of one dollar today is not equal to the value of one dollar in the future. Money today can be invested and interest can be earned over time. The more risk involved in the investment, the higher the interest rate. 7 Appendix 3B: Present Value Concepts 8 There are three fundamental variables in PV calculations: Principal: The amount borrowed or invested Interest Rate: A percentage applied to the outstanding principal. Generally stated as an annual rate. Time: The duration or number of periods 8 Appendix 3B: Present Value Concepts 9 The simple interest calculation is: P = Principal I = rate of interest for a single period N = number of periods P I N 9 Appendix 3B: Present Value Concepts 10 There are many different ways to calculate present values, including the following: Present value formulas Present value tables Financial Calculators Spreadsheets (Excel) 10 Appendix 3B: Present Value Concepts 11 Example (PV of a Single Future Amount) Assume you want to invest a sum of money at 5% in order to have $1,000 at the end of one year. The amount that you would need to invest today is called the present value of $1,000 discounted for one year at 5% 11 Appendix 3B: Present Value Concepts 12 . | 1 CHAPTER 3: THE ACCOUNTING INFORMATION SYSTEM AND MEASUREMENT ISSUES 2 2 After studying Appendix 3A, you should be able to: Prepare a 10-column work sheet and financial statements. After studying Appendix 3B, you should be able to: Understand and apply present value concepts. 3 Chapter 3: THE ACCOUNTING INFORMATION SYSTEM AND MEASUREMENT ISSUES 3 The Accounting Information System and Measurement Issues 4 4 Appendix 3A: Using a Work Sheet 5 Companies often use a work sheet to make the financial statement preparation process easier. Does not replace the financial statements Completing the worksheet gives certainty that all of the details have been captured in the end-of-period financial statements. 5 Appendix 3A: Using a Work Sheet 6 6 Appendix 3B: Present Value Concepts 7 The value of one dollar today is not equal to the value of one dollar in the future. Money today can be invested and interest can be earned over time. The more risk involved in the investment, the higher the .
