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Analyze and monitor financial performance and report financial results to stakeholders. How financial transactions are recorded in the accounting system determines how they show up on the balance sheet.
So what exactly is the balance sheet? You may want to take a look at the Pavlok reading starting on page 20 in our forum library. The balance sheet is snapshot of the financial position of a company.
Unlike an income statement, which is for a certain period of time, the balance sheet is cumulative and up-to-the-minute.
Assets include stuff like cash, accounts receivable, and equipment. Liabilities include bank loans, accounts payable and other debts. Owners Equity is a kind of confusing item to me anyway. Owners equity includes the money that the owners paid to join the corporation. And it includes retained earnings which is too complicated to explain here.
So say you write a check and pay a bill. Cash decreases and accounts payable decrease. Both sides of the balance sheet are affected equally. Or you write a check and and buy a computer. Cash decreases, while equipment increases. Which leads us back to our question 1 — buying capital equipment — it credits cash and debits equipment.
This is the tricky part. Transactions on the asset side of the balance sheet are backward.
How about 10 on the quiz? That means all the other 3 options are actually GAAPs. Starting with D — Revenue from services should be recognized when the practice performs the service.
C — The timing of the recognition of expenses incurred for services rendered depends on the nature of the expense. If you buy a renovation of your suite it might be as long as 30 years before the entire expense is recorded. Okay, this one is true. B — Assets and liabilities are recorded at their critical cost or historical cost.
According to my Accounting Book the historical cost concept states that a company records its transactions based on the dollars exchanged the cost at the time the transaction occurred. If they sell the land there would be some sort of adjustment made for capital gains on property or something.
This IS a little tricky, in part because healthcare organizations file their tax returns on a cash basis. So if you use accrual accounting, you have to convert to pay taxes.
Accrual Based Accounting is when revenues are reported when services are performed rather than when the cash is actually received. Cash Based Accounting is where revenues are recorded when cash is actually received in house and expenditures are recorded when actually paid out.
Cash basis definitely gives you a better picture of cash on hand, but accounting purists would say that accrual gives you a more accurate financial picture because it matches expenses with the revenue they helped earn for each accounting period.
In accrual accounting you record the income when the service is rendered and show your accounts receivable as an asset on your books. This example shows where it might be handier to be on accrual, because you can see what you EXPECT to be collecting on.
The Pavlok text unfortunately not the part copied for you in the library lists the following concerns: First, medical practices pay taxes on a cash basis, so you have to convert at year-end for tax purposes. Measuring income for tax purposes can also be complicated if you receive capitation payments, or other oddities associated with a medical practice.
Second, accrual accounting may make it difficult to measure income for distribution to physicians.
And it can be difficult to measure the financial position of the group for the buy-in and buy-out of physicians. Another drawback of accrual accounting is that it can cause more confusion and work for the bookkeeper. This is a fairly straightforward section in my opinion — just talks about using due diligence when selecting the experts accountants, bankers, attorneys, insurance agents, investment advisors, consultants, retirement plan advisors, etc… and knowing when to use them.
Develop relationships with individual insurance carriers to optimize contract negotiations and maintenance of existing contracts. The tool can be modified to meet the needs of any size or type of medical practice.Our capital is more durable and allows us to invest across year business cycles, enabling us to be far more strategic and long-term oriented without the time pressures created by funds with typical short-term investment horizons.
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