Chapter9: Accounting For Receivables
Section: Chapter Questions
Problem 1Q: What is the matching principle?
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Question
Which method is more efficient to obtain an equivalence?
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Step 1
Answer:
The concept of equivalence tends to compare the cash flows in such a way that two indifferent cash flows exist at different periods are worth the same. Equalizing the cash flows is necessary for investor who is willing to choose a bigger sum in future periods rather than losing any sum at present.
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