HCA 341: Chapter 4: The Balance Sheet & Statement of Cash Flows
accounts payable, as well as ___ expenses, represents payment obligations that have been incurred as of the balance sheet date, but that have not yet been ___.
1. accrued 2. paid
balance sheet transactions: purchase of __ on credit. the transaction results in an increase in ___ and a decrease in equity.
1. advertising 2. liabilities
equity is not affected until the ___ has been ___.
1. asset 2. consumed
a payment of a liability related to an __ that has previously been booked does not affect __.
1. asset 2. equity
the accumulated depreciation account is an example of a contra __ account because it is a __ asset.
1. asset 2. negative
equity is the amount of total ___ financed by nonliability capital, or total ___ minus total ___.
1. assets 2. assets 3. liabilities
the book value is the value of the business's ___, liabilities, and equity as reported on the __ ___. in other words, the value in accordance with ____.
1. assets 2. balance sheet 3. GAAP
liabilities and equity represent claims against the ___ of the business by various classes of __, other claimants with fixed claims, and "owners."
1. assets 2. creditors
in the event of default, by the borrower, creditors have the right to force the business into ___ with ___ as a possible consequence.
1. bankruptcy 2. liquidation
because __ payments are received before the services are ___, organizations that are predominantly capitated will have much smaller accounts receivable balances and much large cash and __ term investment balances than will providers.
1. capitated 2. received
balance sheet transaction: receipt of __ from a 3rd party ___
1. cash 2. payer
the statement of cash flows tells the reader the sources of __ and how this cash is ___.
1. cash 2. used
current assets include cash and other assets that are expected to be ___ into cash within ___ accounting period, which in this example is one year.
1. converted 2. one
short term investments are normally reported on the balance sheet at __, which is the amount ___ paid for the securities.
1. cost 2. initially
credit terms is the statement of terms that extends ___ to a ___.
1. credit 2. buyer
the largest liability claims typically are by ___ or lenders, who have made loans (supplied __ capital) to the business.
1. creditors 2. debt
in a balance sheet, we have ___ and ___ term liabilities and equity.
1. current 2. long
the portion of long-term debt that must be paid in the coming year or accounting period is recorded on the balacnce sheet as a ___ liability titled "current ___ of long-term debt"
1. current 2. portion
a written off means that an asset has experienced a ___ in value and the amount of the reduction is taken as an __ on the income statement.
1. decline 2. expense
carrying costs: current assets cost money because each ___ in assets has to be matched by a dollar of ___.
1. dollar 2. financing
retained earnings, like all ___ accounts, represent a claim against assets, and they are not necessarily available to buy new equipment, to pay ___, or for any other purpose.
1. equity 2. dividends
he cost of supplies used is an ___ that ___ assets and equity.
1. expense 2. decreases
balance sheet transaction: payment of ___. these payments result in an equal ___ in cash and equity.
1. expenses 2. decrease
default occurs when a borrower ___ to make a promised debt payment. not that technical default occurs when the borrower fails to meet one of the restrictions in the loan agreement but is still making the ___ payments.
1. fails 2. required
such adjustments, called ___ of capital by accountants, are routinely made to the plant and equipment accounts on the balance sheet (and to revenues and expenses on the income statement) when assets are ___ or lose value.
1. impairment 2. sold
the income earned on both ST and LT investments is reported on the ___ statement under ___ income.
1. income 2. nonoperating
the net cash from operations line is a more important indicator of financial well-being than is the net ___ or ___ in cash line.
1. increase 2. decrease
when accounts receivable are collected at a later date, cash will be ___ and receivables will be ___.
1. increased 2. decresed
organizations hold cash equivalents and short term investments because cash earns no ___ and money held in commercial checking account balances earning very little ___.
1. interest 2. interest
the statement of cash flows is a financial statement that focuses on cash flows that come __ and go ___ of a business.
1. into 2. out
the assets side (___ side) of the balance sheet lists in dollar times, all of the __ or assets owned by the organization.
1. left 2. resources
debt ratio is typically defined as the total debt (___) divided by total ___.
1. liabilities 2. assets
accrued expenses is a business ___ that stems from the fact that some obligations, such as wages and taxes, are not paid immediately after the ___ are created.
1. liability 2. obligations
the current assets section of the balance sheet is listed in order of __, or nearness to ___.
1. liquidity 2. cash
one of the benefits of prudent current asset management is that more money can be moved into __-term investments, both financial and real, which are expected to generate greater returns than those provided by ___ assets.
1. long 2. current
even though short-term investments pay relatively ___ interest, any return is better than none, so such investments are preferable to __ holdings.
1. low 2. cash
inventories are equivalent to the certain level of supplies necessary to ___ medical needs and to maintain a safety __ to stand against unexpected surges in use, but any inventories above this level create unnecessary costs.
1. meet 2. stock
because of the low or zero return earned on current assets, businesses try to ___ these account values yet ensure that the levels on hand are sufficient to support operations and maintain ___.
1. minimize 2. liquidity
liabilities and equity represent the capital (___) that has been raised by an organization to acquire the assets show on the left side of the ___ sheet.
1. money 2. balance
on the balance sheet, the ownership claim on an organization's assets is called __ assets when the organization as a __ status.
1. net 2. NFP
the equity section of the balance sheet may be called: 1. stockholder's equity 2. owner's ___ worth 3. net worth 4. proprietor's worth 5. partner's ___
1. net 2. worth
new debt would be used to acquire __ assets rather than __ assets.
1. new 2. financial
depreciation is a ___ expense, hence it creates cash flow in addition to the amount of ___ ____.
1. noncash 2. net income
the statement of cash flows is divided into 3 major sections: 1. cash flows from __ activities 2. cash flows from ___ activities 3. cash flows from ___ activities
1. operating 2. investing 3. financing
the retained earnings account represents the accumulation of earnings ___ time that are __ in the business.
1. over 2. reinvested
the primary concept behind all balance sheet transactions is that the basic accounting equation must be ___ - that is, the balance sheet must ___.
1. preserved 2. balance
as with many sources of long-term debt financing, some portion of the borrowed amount (the ___) must be repaid in ___ year.
1. principal 2. each
for purposes of the statement of cash flows, investing activities are defined as both ___ and ___ (fixed assets) investments and ___ investments.
1. property 2. equipment 3. securities
retained earnings (equity) is increased when ___ are earned, even though no __ has been generated.
1. revenues 2. cash
cash and cash equivalents are carried on the ___ line of the balance sheet, so readers cannot determine the relative sizes of each type of asset, which confirms the fact that these are considered to be __ in nature.
1. same 2. identical
the long term investments account is a ___ account that ultimately will be used to purchase new land, buildings and ___.
1. savings 2. equipment
net patient accounts receivable is the amount of money billed for ___ provided but not yet ___.
1. services 2. collected
supplies typically are expended in providing ___, so revenue would be created that ___ assets and equity.
1. services 2. increases
fund accounting is a system for recording financial ___ data that categorizes accounts as ___ or unrestricted.
1. statement 2. restricted
temporarily restricted net assets are funds typically provided by donors that have __ either time or ___ goal restrictions.
1. stipulated 2. predetermined
net value is the dollar value of a business's assets after ___ the business's ___.
1. subtracting 2. liabilities
the financing represented by retained earnings has already been used within the business to buy property and equipment, to buy ___, and yes to __ the cash and cash equivalents, short/long term investments.
1. supplies 2. increase
short term investments represent cash that has been ___ invested in highly liquid, low-risk securities such as banking __ accounts, money market mutual funds, US treasury bills, or prime commercial paper having a maturity greater than __ days but less than one year.
1. temporarily 2. savings 3. 90
accumulated depreciation represents the ___ dollars of depreciation that have been expensed on the income statement against the historical cost of the organization's ___ assets.
1. total 2. fixed
cash flows from INVESTING activities focuses on the gross (__) investment in __ assets.
1. total 2. fixed
if a business writes down or decreases the value of its assets, its liabilities are ___ because these amounts are still owed to creditors and others. if total assets are written down so much that their value drops below that of total liabilities, the equity reported on the balance sheet becomes a ___ amount.
1. unaffected 2. negative
securities have a maturity of ___ months or less.
3
fund accounting is only applicable to ___ organizations.
NFP
treasury bills are short term debt issued by the ___ ____.
U.S. government
a fund is defined as a self-contained pool set up to account for a specific ___ or project.
activity
the first, and typically most important, adjustment is to __back the noncash expenses that appear on the income statement.
add
access to capital markets is seen as an economic ___ that for profit businesses have over NFP businsses.
advantages
liabilities represent claims against the ___ of an organization that are fixed by contract.
assets
the balance sheet reports the __ of an organization and how those ___ were financed
assets
the right side reports the sources of financing (capital) used to acquire the __ listed on the left side.
assets
fixed assets are usually labeled as net property and equipment on the ___ ___.
balance sheet
from a pure liquidity standpoint, the greater the net working capital, the ___.
better
balance sheet transaction: payments of accounts payable (advertising ___)
bill
the ultimate rewards for minimizing an organization's current assets are the reduction in ___ costs.
carrying
the key point is that the equity balance is not a store of __.
cash
operating income does not equal ___ ____.
cash flow
cash represents actual cash in hand plus money held in commercial ___ accounts (demand deposits)
checking
the statement of cash flows focuses on the important determinant of financial ___.
condition
unrestricted net assets are funds that are not ___ required to be used for a specific purpose.
contractually
an asset is an item that either possesses or ___ economic benefit for the organization.
creates
balance sheet transactions: 1. purchase of supplies on __
credit
some providers do not break out inventories as a separate item on their balance sheets but rather include the value of inventories in a catchhall balance sheet account called "other ___ assets"
current
the permanently restricted portion of such funds is not available for ___ use.
discretionary
net assets is the __ value, according to GAAP.
dollar
each transaction must have a __ effect, either one on the left side and one on the right side, or offsetting effects on the same side.
dual
a business is liquid if it has cash available to pay its bills as they become ___.
due
the greater the value of acculumated depreciation means the there will be a smaller value for the organizations net propert and ___
equipment
balance sheet transactions: 1. purchase of ___ for cash: to support operations, the business needs diagnosis ___.
equipment (2x)
a collection for services previously billed and recorded does not affect ___.
equity
a payment of a liability related to an expense that has previously been incurred does not affect ___.
equity
in NFP businesses, the term "net assets" is often used on the balance sheet in place of ___.
equity
in a balance sheet, we have liabilities and __
equity
retained earnings is also known as __
equity
the debt ratio is a debt utilization ratio that measures the proportion of debt versus ___ financing.
equity
assets = liabilities + equity just as what?
equity = assets - liabilities
advertising is an ___, as opposed to an asset (like supplies), because the benefits of the outlay have been immediately realized.
expense
equity is reduced when ___ are incurred.
expenses
long term securities investments are reported on the balance sheet at __ __ value, rather than initial cost, so changes in market conditions over time will cause the value of this account to change, even if the securities held remain the same.
fair market
long term investments represent investments in ___ assets, rather than representing real assets.
financial
the balance sheet is also called the statement of ___ ___.
financial position
the third major asset category is net property and equipment, often called ___ assets.
fixed
NFP organizations typically carry large amounts of long term securities investments, some funded from depreciation cash flow and hence often called ___ depreciation.
funded
the fixed assets (land buildings and equipment) are first listed at ___ cost or known as the purchase price.
historical
fixed assets are highly __ and typically used over long periods of time by the organization.
illiquid
only the portion of retained earnings that is sitting in the cash account is ___ available for the business for use.
immediately
most providers prefer the __ format.
indirect
two formats can be used for the statement of cash flows: the direct format and the ___ format
indirect
the least liquid of current assets is going to be ___.
inventories
a balance sheet is a financial statement that list a business's assets ___ and equity. (fund capital)
liabilities
equity is a residual claim that depends on asset values and the amount of ___.
liabilities
total liabilities consist of current ___ and long-term debt
liabilities
because liability claims are paid before equity claims are if a healthcare organization is ___, liabilities are shown before equity both on the balance sheet and in the basic accounting equation.
liquidated
operating income and net income reflect an organization's ____ term economic profitability as defined by GAAP.
long
in a balance sheet, we have assets which included current and __ ___ assets.
long term
The second major asset category, after current assets, is ___ ___ ___.
long term investments
the change in cash line has limited value in assessing an organization's financial condition because it can be ___ by financing activities.
manipulated
short term investments are sometimes called ___ securities.
marketable
as with assets, liabilities are listed by ___ (short term versus long term)
maturity
the statement of cash flows focuses on the __ of cash.
movement
money market funds are __ funds that invest in safe, short term securities such as treasury bills and commercial paper.
mutual
equity represents a residual claim against the total assets of the business and also the fact that equity can be ___.
negative
the decrease in equity will be matched by a reduction of __ ___ on the income statement.
net income
the difference between total current assets and total current liabilities is called ___ ___ ____.
net working capital
it is important to convert __ current assets into short term investments as quickly as possible.
nonearning
short term debit is called ___ payable.
notes
current liabilities include liabilities that must be paid within ___ accounting period.
one
the long term debt section of the balance sheet represents debt financing to the organization with maturities of more than __ accounting period.
one
depreciation is accounted for in the cash flows from ___ activities section.
operating
the most important source of OPERATING CASH FLOW IS ____ income.
operating
cash flows from OPERATING activities focuses on the sources and uses of cash tied directly to _____.
operations
the balance sheet will provide an ___ of the economic position of the organization as a whole.
overview
balance sheet transactions: 1. investment by ___
owners
the equity section reflects the ___ status of the organization.
ownership
accrued expenses occur because the business has incurred the obligation to pay for the services received but has not made ___ before the financial accounting books are closed.
payment
assets create or __ economic benefit for the organization.
possess
the income statement focuses on accounting ___.
profitability
credit terms allow payment sometime after the ___ is made.
purchase
for NFP businesses, all earnings must be __ in the business.
reinvested
as the term net implies, net assets represent the dollar value of assets ___ when a business's liabilities are stripped out.
remaining
balance sheet transactions: services ___ for credit.
rendered
current assets do not generate high ___.
returns
long term investments report the amount the organization has invested in various forms of long term ___.
securities
the cash flows from FINANCING activities focuses on the use of ___ to finance its operations and other business activittes.
securities
cash equivalents are __ term securities investments that are readily convertible into cash.
short
other assets are really just a category of miscellaneous long-term assets, which may or not be ___.
significant
the balance sheet presents a ___ of the financial position of an organization at a given point in time.
snapshot
it is important to conver zero-return assets into __-return assets.
some
permanently restricted net assets are usually contributions that must be maintained permanently by the organization, however, all or part of the associated earnings can be ___.
spent
commercial paper is short term debt issued by very large and financially ____ corporations.
strong
fixed assets are maintained at a level __ to handle peak patient demand.
sufficient
the net increase or the net decrease in cash is merely the ___ of the totals from the three major sections: 1. cash flows from investing activities 2. cash flows from operating activities 3. cash flows from financing activities
sum
trade credit is the credit offered by businesses while ___ (vendors) when credit terms are offered.
suppliers
balance sheet transactions: recognition of ___ used.
supplies
most creditors' claims are ___, meaning that they are not tied to specific assets pledged as collateral for the loan.
unsecured
the net increase or decrease in cash line is used to __ the entries on the statement of cash flows.
verify