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Accounting and The Financial Management Process: © 2013 Delmar/Cengage Learning. All Rights Reserved

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30 views

Accounting and The Financial Management Process: © 2013 Delmar/Cengage Learning. All Rights Reserved

Uploaded by

pooja natarajan
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
You are on page 1/ 13

Accounting and the Chapter

Financial Management
Process 5

© 2013 Delmar/Cengage Learning. All Rights Reserved.


Objectives
• Upon completion of this chapter, you will
be able to:
– Describe the levels of accounting expertise for
various sizes of healthcare facilities
– Differentiate between financial and
managerial accounting
– List the stakeholders in healthcare financing
– Identify generally accepted accounting
principles
2
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Introduction
• Healthcare organization size correlates
with sophistication of accounting and
financial management
– Small practices can get by with a bookkeeper
and a part-time accountant
– Large publicly held healthcare corporations
need bookkeepers, accountants, budget
managers, outside auditors, and risk
managers

3
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Financial Accounting and
Managerial Accounting
• Financial accounting: preparation of
financial documents for external use
– Reports to Medicare and Medicaid
– Reports to stockholders
– Financial statements and budgets of
governmental healthcare agencies

4
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Financial Accounting and
Managerial Accounting
• Managerial accounting: preparation of
financial documents for internal use
– Budget-to-actual expense reports
– Profitability (or loss) forecasts
– Breakeven analyses for new services
• Dual-use reports
– Annual balance sheet and income statements
– Budget documents

5
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Stakeholders in Healthcare Finance
• Direct financial stakeholders
– Owners, partners, and stockholders
– Bondholders, lenders, and creditors
– Employees and benefactors
• Governance and regulatory stakeholders
– Governing boards
– Governments
• Customers

6
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Generally Accepted Accounting
Principles
• GAAP: standards and rules for recording
financial transactions and reporting
financial information
– Codified by Financial Accounting Standards
Board
– Accepted by American Institute of Certified
Public Accountants
– Even with standards, accounting is more art
than science
7
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Generally Accepted Accounting
Principles (cont’d.)
• Going concern concept
– Assumption is that medical facility will
continue in business (is a going concern)
– Asset and liability values are based on
continued operation
• Assets typically valued at cost
• Liabilities assumed to be fully payable
• If a going concern fails, its value is likely to be far
less than what is on the “books”

8
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Generally Accepted Accounting
Principles (cont’d.)
• Matching
– Accrual accounting standard for businesses
• Revenues posted on date earned
– A medical service provided today gets posted as revenue
today, even when payment is not expected for weeks
• Expenses posted as resources are used
– When a pay period crosses an accounting, the expenses
must be split across the accounting periods
– Depreciation: reducing stated value of an
asset based on its age or number of uses

9
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Generally Accepted Accounting
Principles (cont’d.)
• Consistency
– Accounting methods (such as depreciation
schedules) used consistently over time
• Materiality
– Errors that significantly affect the accuracy of
financial statements must be corrected
– Significance is determined by professional
accountants and auditors

10
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Generally Accepted Accounting
Principles (cont’d.)
• Full disclosure
– Anything that may affect the financial
condition of the business must be disclosed in
the annual financial report
– This includes events that occur between the
end of the fiscal year and the preparation of
the annual report (subsequent events)

11
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Summary
• Financial accounting generates reports
mostly for external use
• Managerial accounting generates reports
mostly for internal use
• Stakeholders in healthcare are all persons,
organizations, and governments impacted
by the healthcare facility

12
© 2013 Delmar/Cengage Learning. All Rights Reserved.
Summary (cont’d.)
• Generally Accepted Accounting Principles
are standards and rules used by
accountants and include:
– Going concern concept
– Matching
– Consistency
– Materiality
– Full disclosure

13
© 2013 Delmar/Cengage Learning. All Rights Reserved.

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