Author(s): Muhammad Nabeel Mustafa, Haroon ur Rashid Khan, Salman Ahmed Shaikh
Purpose: Debtors are current asset has a time of 120 days at max. During this time, the value of debtors gets changed. This study explores the effect of this time value of money. The objective of this research is to sight see the effect of the time value of money, normal inflation, and purchasing power on the comprehensive debtors/receivable side of the balance sheet, which can be devalued if key macroeconomic factors determine the devaluation percentage of a single currency. Methodology: Concerning these significant questions of the research, we grasped a pragmatic philosophy with an inductive approach. A mono-method of qualitative based on grounded theory was endorsed, which helped to unfold a new model through qualitative data analysis. Results: A new strategy is developed, which utters three components; normal inflation, time value of money, and purchasing power revealing significant contribution in literature. The effect of these constructs was not incorporated in the financial statement, showing vague financial valuation. These constructs have a significant impact on the financial statement of any organization especially with items having time components in the balance sheet, such as receivables and payables. Research Limitations: This research is limited to only one currency i.e., Pakistani Rupee but can be implemented on any currency. Practical Implication: The strategy will help auditors to pass the adjustment entry in the balance sheet to adjust the value of the currency at the year-end. Originality: The research is based on the expert’s opinion and a new model is developed to present the accurate value of any organization through the financial statement. Future: This strategy needs to be tested quantitatively and an adjustment should be made within the financial statement to show the factual and authentic presentation of financials of any organization.”