PPD 516 Financial Accounting HC Exam | Verified with 100% Correct Answers

PPD 516 Financial Accounting HC Exam | Verified with 100% Correct Answers profitability trade off risk vs return viability trade off liquidity vs solvency Liquidity measure amount of resources an org. has: cash, can converts to cash, to meet the near-term obligations Solvency long-term perspective of if the org will have enough potential over the next 3,5,10 years to meet major cash needs that will cover expenses over those years. near-term less than 1 year out non-profit Assets = liabilities + net assets for-profit Assets = liabilities + equity Balance sheet: (networth) a snapshot of a certain period like Dec 31 2020 Assets: cash, building, inventory, investments, accounts receivable Liabilities: things on credit, debt, expenses that haven't been paid yet, accounts payable(you got a bill but haven't paid it back yet) Income statement aka operating statement A financial statement that has a start and end date. shows the budget for an org over a period of time "a movie of things that occurred". Revenue-expenses = net income a financial statement that provides information on whether the organization has earned a profit or loss for the year, and, if so, how much. Health care providers, such as hospitals and long-term care facilities, refer to this as an operating statement, whereas for-profit organizations that are not health care providers refer to this as an income statement." Cash Flow Statement aka checking account "which provides information about the organization's cash inflows and outflows. " - operating activities, investment activities, and finance activities = the change in cash over that period of time 3 parties that pay for HC 1. insurance companies 2. 3rd party payers 3. government programs Accounting Assumptions 1. going concern ary unit 3. business entity 4. period time going concern (Accounting Assumptions) assume the business is presumed to continue operating instead of being closed or sold. monetary unit (Accounting Assumptions) transactions and events are expressed in monetary or money, units. business entity (Accounting Assumptions) bidness is accounting for separately from other bidness entities, including its owner. time period (Accounting Assumptions) life of a company can be divided into time periods such as months and years. Accounting Constraints the practical limitations and guidelines that influence how financial statements are prepared and interpreted Cost-benefit constraints only info with benefits of disclosure greater than the cost need to be disclosed Materiality constraints only info that would influence the decisions of a reasonable person need be disclosed. Things that can make a HUGE difference. (eg. instead of left turn you make a right turn its sooo different) DOES IT MATTER =materality. Conservatism and industry practice (constraint) If two accounting methods are equally reasonable, choose the one that is less likely to overstate assets or income. Always overestimate your cost, always have a low est of revenue. are sometimes included as a constraint, also. GAAP Primary accounting rules that establish standard across accounting organizations. These are Est. by FASB's rules are called Generally Accepted Accounting Principles (GAAP). GAAP constitute a large number of pages of detailed technical rulings. " Accrual accounting (relevant to income statements) You recognize income when you earn it, even if the customer hasn’t paid you yet. You recognize expenses when you owe them, even if you haven’t paid the bill yet. Example: If your electric company sends you a bill in December but you don’t pay until January… BLANK accounting: Expense shows up in December (when you used the electricity). Cash accounting: Expense shows up in January (when you pay the bill). Non-for-profit: statement of financial position, statement of operations, statement of cash flows For profit: balance sheet, income statement, statement of cash flows Triple Aim -Improve the health of the population -Enhance the patient experience of care -Reduce or control the per capita cost of care Long term care: Assisted care, nursing homes, rehab, mental, home HC agencies non-profit Assets = liabilities + NET ASSETS for-profit assets = liabilities + EQUITY GAAP vs IFRS differences 1. inflation adjusted numbers 2. treatment of leases 3. research and development costs 4. fair market value of assets primary functions of finance including financial management of an organization, to supervise the acquisition and disposition of the organization’s resources, specifically cash primary functions of accounting Financial accounting is a formalized system designed to record financial HISTORY while managerial accounting provides financial information that might be used for better decision making for the organization's FUTURE primary goals of financial management for not-for-profit health care organizations profitability and viability. A not-for-profit health care organization has several goals: improving the health and well-being of communities, minimizing morbidity and mortality, financial viability and profitability, and providing high quality of health care service uses of profit for health care organizations maximization of return on investments (ROI), return of equity (ROE), return of assets (ROA), and return on net assets (RONA). relationship between financial risk and financial return referred to as the profitability trade off, risk is compared to return “short-term” near-term estimated to be 1 year or less. Meaning, an organization can be deemed liquid if they have enough resources and/or funds to get them to their payment deadline