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Discrepancies in Year-End Figures


Understanding Variances Between Year-End and Year-Beginning Amounts

Question: Why are the amounts at the end of the year not the same as the beginning of the year?

Answer: A key feature of our output is the adjustment of future values to present-day dollars, ensuring that the figures account for changes in purchasing power over time.

To achieve this, we apply the inflation rate (defaulted to 2%, configurable in “Advanced Settings”) to discount the ending values of each year's financial data back to today's dollars.

This means that the value of income in future years is adjusted to reflect what it would be worth in today's terms, taking into account the erosion of purchasing power due to inflation. Consequently, the starting value for each subsequent year in the detailed financial ledger is reduced by 2%, mirroring the loss in purchasing power and providing a realistic view of future finances.

Keywords: inflation, purchasing power, future values


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