What Can Explain the Failure of Relative PPP to Hold

question 45

Essay

What can explain the failure of relative PPP to hold in reality?

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Definitions:

Deposit In Transit

Money that has been received and recorded by a business but has not yet been recorded by its bank.

Outstanding Checks

Checks that have been written and recorded in the issuing entity's books but have not yet been cashed or cleared by the bank.

Note Receivable

A written promise for amounts to be received, typically outlining the terms including payment amounts, interest rate, and due date.

Bank Reconciliation

A process that explains the difference between the bank balance shown in an organization's bank statement, as provided by the bank, and the corresponding amount shown in the organization's own accounting records at a particular point in time.