Accounting final review

trade credit

"borrowing" money from a vendor by delaying payment for good/ services already received "2/10 net 30"

explain how an organizations liquidity and solvency are related

- Liquidity > the ability to meet short-term obligations- Solvency > the ability to meet long-term obligations

when using "mark to market" valuation which GAAP method is preferred

1

who is the first, second and third party?

1 - patient 2 - provider 3 - en entity who is responsible for reimbursement for care delivered to patients

what are the two most crucial aspects of this accounting entity concept

1) once the entity is defined, the resources and obligations of the entity should not be commingled with those of other entities 2) all financial events should be viewed from the entities point of view (determining if they have a payable or receivable)

GAAP nomenclature

1. Asset 2. Liabilities 3. NA 4. Revenue 5. Revenue Deductions 6. Expense

equity in not for profits

100% of retained earnings are invested back into the organization

what is a fiscal year? why might an organization choose a fiscal year that differs from a calendar year?

12 month period which a company budgets its spending. It does not always begin in Jan and end in Dec.could end different from a calendar year because of the desire to make things as easy and inexpensive as possible, inventory cycle& how busy the bookkeeping staff is are key factors

Jerry bought a new tractor for $40,000 for his landscaping business. He thinks it will last him 5 years at which time he will sell if for scrap for $750.00. Using the Double Declining Balance method of depreciation what is his depreciation expense for years 1 and 3 respectively?

16,000 and 5,760

medicare was implemented in what year

1966

medicare was implemented in which year

1966

fair market value levels

1: most reliable, objective information used, direct observation 2: observation of non-identical yet similar items 3: indirect observations with greater subjectivity

PPACA (Patient Protection and Affordable Care Act)

2010: lifetime $ max. limits prohibited, stay on parents plan until 26 y/o 2011: medicare part B 2012: launch of accountable care organizations 2013: states created their own online health insurance marketplace or use federal one 2014: expand medicaid, individual mandate

Using the information from the SYD problem Purchase Price: $325,000 Useful Life of 5 years Salvage Value of $5,000 What is the accumulated depreciation through year 3?

256,000

Jones Services bought a new building on 9/15/20X1 for $950,000 with a Salvage Value of $50,000 and Useful Life of 30 years. The land was valued at $275,000. Using the Straight Line method of depreciation what is the book value of the land in 20X5

275,000

Given a purchase of new equipment in the amount of $250,000 with a 8 years useful life and $25,000 salvage value what is the straight line depreciation amount per year?

28,125 a year

Given Liabilities of $185,000 and Equity of $205,000 what are Assets:

390,000

Given the terms: 5/15 net 30 what would be the discount from the vendor if paid immediately after receipt of invoice?

5%

Given a purchase of new equipment in the amount of $250,000 with a 8 years useful life and $25,000 salvage value what is the sum of digits amount of depreciation for year 1?

50,000

Given that you purchased equipment for $90,000 and then it has depreciated over the years in the amount of $40,000. What is the book value of the equipment?

50,000

Given Revenue of $75,000 and Profit of $15,000 what were Expenses over the given period?

60,000

Given a purchase of new equipment in the amount of $250,000 with a 8 years useful life and $25,000 salvage value what is the double declining balance depreciation amount for year 1?

62,500

Using the Sum of Years Digits method find the depreciation in year 3 for the following: Purchase Price: $325,000 Useful Life of 5 years Salvage Value of $5,000

64,000

Again using the same information from the SYD problem Purchase Price: $325,000 Useful Life of 5 years Salvage Value of $5,000 What would be the book value of the item after 3 years of SYD depreciation?

69,000

GAAP requires assets such as property, plant and equipment to be based on what type of cost valuation method

?

A piece of equipment was purchased for $65,000 on 1/1/20X1 and has a salvage value of 20% and expected useful life of 10 years. What is the straight line depreciation amount per year?

??

A piece of equipment was purchased on 1/1/20X1. It has a useful life of 5 years and salvage value of 10%. Accumulated depreciation amounted to $100,000 on 12/31/20X5. What was the purchase price (historical cost) of the item?

??

internal control means the system is designed to catch and correct errors:

??

when using mark to market valuation which GAAP method is preferred

??

income statement

A financial statement showing the revenue and expenses for a fiscal period.

fiscal year

A fiscal period consisting of 12 consecutive months.

future profits

A valuation method requiring each asset be valued on the basis of the amount of additional profits that can be generated using the asset

price level adjusted historical cost

A valuation method that adjusts the asset's historical cost, based on the general rate of inflation.

what are pros and cons of accrual accounting

Accrual accounting, matches these revenues and expenses in the same time period, and provides a better measure of profit for a specific time period such as one year. However, it does not directly report the net cash flow for the accounting period.

long term cash obligations

Amounts to be paid in cash more than 1 year in the future are valued at the amount to be paid less the implicit interest included in that amount

the fundamental accounting equation is (for balance sheet)

Assets = Liabilities + Equity used to provide the organizations financial position at a specific point in time

what is cash accounting

Cash accounting is an accounting method where payment receipts are recorded during the period in which they are received, and expenses are recorded in the period in which they are actually paid. (more susceptible to manipulation)

what are pros and cons of cash accounting

Cash accounting is simple and inexpensive. However, it does not match the resources used in earning revenues in a particular fiscal period.and is more open to manipulation than accrual, since the timing of collections and payments affects reported profitability.

why are some charges not reported as revenue for health care organizations

Due to third party payers and medicare and medicaid, hospitals are not guaranteed all of the money that they charge.

what is FIFO

First in, First out. it's a system to ensure old product is used before new product.

why is GAAP concept of objective measurement paramount in understanding asset valuation?

If the organization values all of its assets based on what was paid for them when acquired, there can be no questions as to the objectivity of the valuation

how are paid in capital and retained earnings different in for profit health care organizations

In for-profit corporations, owner's equity is split into two categories; contributed capital and retained earnings. Contributed capital is that portion of owner's equity that was directly contributed/invested by the owners. Retained earnings represent the portion of earnings generated over the years that have not been distributed back out to the owners

IASB stands for

International Accounting Standards Board

IFRS stands for

International Financial Reporting Standards

what are the advantages and disadvantages to measuring asset values based on expected future profits

It gives an representation of what the companies future profits can be based on an asset, however this is not very accurate due to subjectivity

how does a health care provider indicate the obligation to provide care under a managed care contract that has been paid in advance

It list this as a liability as it now has an obligation to provide care under this contract.

ledger vs journal account

Journal is the first step of the accounting cycle where all the accounting transactions are analyzed and recorded as the journal entries, whereas, ledger is the extension of the journal where journal entries are recorded by the company. Each account has an opening or carry-forward balance and would record transactions as either a debit or credit in separate columns and the ending or closing balance

what is LIFO

Last-In-First-Out - LIFO assumes the last stock bought by the business is sold first and therefore the cost of each unit sold is the last cost recorded.

the two pay-ways under MACRA

MIPS (merit based incentive programs) and APM (alternative payment models)

historical value vs market value

Meets GAAP requirements but fails to provide clear picture of assets worth vs value at which one could actually sell the asset for in current day market conditions

what is net realizable value

NRV: valuation of assets, measuring them at what you could get if you were to sell them. Finding out how much could be realized net of any additional costs that could be incurred to sell off the assets (reduction in price). This method is not seeking to find profit

correct externalities

Positive and negative secondary effects that a third party did not choose to participate like education and pollution

what is replacement cost

Replacement cost: considers how much it would cost to replace the asset.

in a publicly traded organization, why might a company have a market value that differs from the owners equity on the balance sheet

Tangible assets are often understated and the stock prices can often be higher than the buyers equity. Also, companies with few assets can still be really profitable and therefore have a value in excess of the stockholders equity.

imperfect information

The absence of full knowledge concerning product characteristics, available prices, and so on.

historical cost

The amount an entity paid to acquire an asset. This amount is the value used as a basis for tax returns and financial statements

asset valuation

The appropriate value for an asset depends on the intended use of the asset valuation information, which can be determined using a variety of asset valuation methods.

what can a financial statement user learn from analyzing the operating statement? will this provide all the information necessary to understand the organizations cash position?

The income statement generally shows how much profit or earnings an organization made during the past year. It is often the primary statement used for assessing the current operations of the organization. Revenues and expenses, however, do not directly measure cash flow, which is why a cash flow statement is also necessary.

net assets

The portion of total assets not required to repay obligations owed to creditors.

contributed capital

The resources that investors contribute to a business in exchange for ownership interest

how do health care organizations get paid? do all payers pay the same rate for the same service

They get paid through charges, they negotiate for rates with insurance companies or third party payers, not everyone pays the same amount it depends on the insurance (if you have any) and what is contracted between them and the provider

under the accrual accounting method additional accounts also exist, and these accrual accounts are only used in the accrual accounting method (T/F)

True

who's gonna ace this midterm???

YOUUUU

co-insurance

a % of the billed charged (after applying the contractual discount) that the patient is responsible for, even if/ when insurance coverages begins

public goods

a commodity or service that is provided without profit to all members of a society, either by the government or a private individual or organization.

chart of accounts

a list of all accounts used by a businesses accounting cycle, follows a specific format and requires specific nonmenclature

cash accounting would recognize a transaction when

a loan is taken for new machinery, cash paid for supplies, wages are paid, cash is received for services

deductible

a minimum out of pocket amount that the patient must reach in the insurance period before insurance coverage begins

income or operating statement

a summary of the organizations revenues and expenses for the accounting period (monthly, quarter, yearly)

cash basis accounting

a system for recording revenues and expenses that records revenue when cash is received from customers and expense when cash is paid

accrual basis accounting

a system for recording revenues and expenses that records revenue when the organizations provides goods or services and records expenses when resources are consumed to provide goods or services, regardless of when cash is collected or paid

net realizable value

a valuation method based on the amount received if it were sold, net any costs related to the sale

replacement cost

a valuation method under which each asset is valued at the amount it could cost to replace the asset

fair value or mark to market accounting

a valuation method used to record financial assets, such as stocks and bonds, at the current value they could be sold for. Similar to net realizable value but with a greater focus on objective data

a cooperative grouping of healthcare providers are known as

accountable care organizations

The Journal entry for: Patients were billed $25,000 for services rendered during the month. would entail which two accounts?

accounts receivable and routine services revenue

when the ____ method of accounting is used a _______ _ ____ __ must be prepared to track cash inflows and outflows

accrual; statement of cash flows

goals of financial management

aid in the maximization of organizational profit. (profitability and viability)

describe mark to market asset valuation

aka fair value accounting refers to accounting for the "fair value" of an asset or liability based on the current market price, or the price for similar assets and liabilities, or based on another objectively assessed "fair" value method used to record financial value for assets at the current value in which they could be sold

short term cash obligations

amounts to be paid in cash within 1 year are valued at the amount of the cash to be paid

fund accounting

an accounting entity with its own set of financial records (statements) ex: building fund, annual health fair fund

what is accrual accounting

an accounting method where revenue or expenses are recorded when a transaction occurs rather than when payment is received or made. The method follows the matching principle. It focuses on anticipated revenue and expenses. 9tracks profitability better, more conservative)

what is a third party payment system? how does this payment system affect the financial management of health care organizations

an entity that pays medical claims on behalf of the insured. Examples of third-party payers include government agencies, insurance companies, and employersit makes the financial management more complicated, charges are not the same as revenues

co-payment

an initial attempt by the insurance industry to control utilization of services by requiring the patient to pay a small flat fee each time they encounter a provider/ organization

retained earnings

are the profits earned by the organization over its lifetime that have not been distributed to its owners in the form of dividend

describe the basic accounting equation. How does the double entry accounting system work?

assets = liabilities + equity

expanded accounting equation

assets = liabilities + net assets + (revenue - expenses)

asset classification

assets are commonly classified on the balance sheet as current, fixed, investments ,and intangibles

fixed assets

assets that are relatively permanent, such as land, buildings, and equipment

organizations financial position summarized by

assets, liabilities, net assets,

what are some specific examples of assets and liabilites

assets: CAT scanner or the CEO's office liabilities: money owed to suppliers, employees, shareholders, taxes, etc

explain the following GAAP principle: matching

attempt to put expenses into the same period as the revenues that caused them to be generated, it is the basis for depreciation.

financial accounting looks

backward

types of financial statements

balance sheet, income statement, statement of cash flows, statement of revenue/ expenses, statement of change in net assets

objective evidence

based on evidence that reasonable individuals would agree upon

why is the balance sheet considered a point of time statement

because it summarizes a company's assets, liabilities and shareholders' equity at a specific point in time, usually the last day in the accounting period

why doesn't every person or organization invest all available funds into the stock market, which has the highest expected return?

because the risk might not be worth it, maybe it won't be insured if lost. Also the risks are higher than in the money market fund

examples of long-term liabilities

bonds payable, mortgages payable, long-term notes payable, lease liabilities, and pension liabilities obligations that a company expects to pay after one year

the historical cost of an item less the accumulated depreciation of the item is known as

book value

a lump sum amount that is less than would be paid in total on a fee for service basis is a:

bundled payment

a lump sum amount that is less than would be paid in total on a fee for service basis is a

bundled payment ?

explain several implications of IFRS on financial reporting by health care organizations

can impact the way things are recorded, can impact how an organizations profit/ loss is interpreted, how outsiders view the organization, contracts could be affected, compensation can be affected, plans need to be revised

cash accounting is when:

cash is recieved and expenses are paid

Unearned (Deferred) Revenues

cash received in advance of providing products or services unearned value- over time- revenue

GAAP methods to accounting

conservative approach, matching principle, overly optimistic

conservatism

consideration should be given to risks the organization faces

the difference between a providers charge for service and the amount agreed to by the provider and the third party payer is a:

contractual allowance

the difference between a providers posted charge for service and the amount agreed to by the provider and third party payer is a

contractual allowance

equity in for profits

contributed capital (amount investors purchase to establish ownership) and retained earnings (excess revenue over expenses which remain in organization for growth)

this fee is usually due at the time of service in order to see a provider

copayment

expenses

costs of goods/ services required to provide services and generate revenue

historical cost is adjusted each year based on the wear and tear of an item. This adjustment is shown in which account

depreciation

The unit for which we wish to account. This can be a person, department, project, division or organization. It is defined as an:

entity

accounting principles

entity, historical cost, going concern, reporting period, monetary unit, conservatism, consistency

future profit method

estimate of future profits based upon future utilization rates, subjectivity

bad debt expense

expense associated with estimated uncollectible accounts receivable, an operating cost and not a deduction from revenue (when someone does not pay)

conservative GAAP approach

expenses recorded in the year incurred, regardless of any revenue experienced

matching

expenses should be recorded in the same period as the revenues they were responsible for generating

what were the major changes contained in the patient protection and affordable care act of 2010?

extended healthcare coverage to uninsured people, improved insurance for those with pre-existing conditions, stopped bias charging based on sex, age, etc. and made insurance, plans cover certain procedures, eliminate lifetime caps, children can stay on parents insurance until 26 y/o

stock and bonds that an entity invests in are valued on the balance sheet using which valuation method

fair value accounting

A mortgage is considered a notes payable and is an expense account.

false

All patients pay their financial obligations.

false

Cash is increased by a credit and decreased by a debit.

false

Depreciation expense and accumulated depreciation are the same in types of accounts in accounting.

false

Given the following journal entry: Employees were paid wages of $75,000 during the period there would be a credit to wages and salaries expense account

false

I want to use the future profits valuation to determine how much insurance coverage I should have on an entity

false

Most undetected fraud is "material" in accounting.

false

There would be a journal entry for : 10/15/20X1 ordered supplies in the amount of $45,000

false

a certified statement means that the documents reviewed are error free and correct

false

a good strategy is to maximize an organizations liquidity and solvency

false

a system of checks and balances make it easy to defraud and embezzle from an organization

false

an auditor reviews all documents to determine accuracy

false

charges are the same as revenues in accounting

false

current assets and liabilities at the top of the balance sheet give the reader a quick assessment of solvency

false

current assets and liabilities at the top of the balance sheet gives the reader a quick assessment of solvency

false

depreciation is the same as money in the bank

false

equity is the amount of money I have in the bank (cash) after I accounting for my assets and liabilities

false

equity is the amount of money i have in the bank (cash) after I account for my assets and liabilities

false

if providers give away care (free or charity) they can include the amount they would have charged as revenue

false

net assets (equity) is the cash an organization has to invest for its future

false

nominal accounts are zeroed out after the reporting year has ended

false

presidential executive orders remain in full force forever

false

explain the following GAAP principle: objective evidence

financial reports are based on such evidence as reasonable individuals could all agree on within relatively narrow bounds. (paperwork, recipes/ canceled checks/ bank statements, etc. it is the historical cost)

explain the following GAAP principle: full disclosure

follows the conservative nature of accounting, if no rule exists for action, it must be documented as a note to the financial statement

why do not for profit organizations use a fund accounting system

fund: an accounting entity with its own separate set of financial records (ex: development fund where donors give money for a certain project)because they have a distinctive need to separate funds and sources of money, often donations, within their organization

the first item listed on healthcare financial statements and reflects the adjustments of charity care and contractual adjustments is known as

gross patient revenue ?

non GAAP income statement equation

gross patient service revenue - revenue deductions (charity care/ contractual adjustments) = net patient service revenue

insurance equation

gross revenue charge - contractual agreement = net revenue/ payment

net assets with donor restrictions

have some restriction imposed by the donor, these restrictions might limit when or how an organization uses the donation or it might prevent the organization from ever consuming the donation and limit it to consuming earnings from investments acquired with the donated money

components of CPI measurement

housing, apparel, transportation, education and communication, recreation, food, medical care, other

financing decision thoughts

how to raise capital )debt/ equity) to fund an investment made by treasurer/ top management interest is a financing decision

materiality

if an individual would make a different decision based on the incorrect information resulting in an error

intangible assets

intangible assets this type of asset results in substantial valuation difficulties because it has no physical form (culture, reputation, employee motivation) (market value)

accumulated depreciation

internal fund account that captures the depreciation expense of the asset

the users of financial statements are

investors, suppliers, bankers, stockholders

stockholders equity

is divided into contributed capital and retained earnings

contributed or paid in capital

is the amount the organization has received in exchange for shares of stock that reflect ownership of the organization

credit and debit on the left and right side of the balance sheet

left: debit increase and credit decreases right: debit to decrease and credit to increase

obligations of the organization to outside creditors

liabilities

liability classification

liabilities are generally divided into current and long term categories

viability is measured by __ and ___

liquidity and solvency

primary functions of managerial accounting

looks forward; provides financial information that might be used for making improved decisions regarding the future

what are the primary goals of financial management for not for profit health care organization

making a profit, improving the overall health and well being of their communities, providing the best health care services, and minimizing morbidity/ mortality rates

why is the US healthcare system considered so complex

many different payment systems due to all the third party providers, organizations have different accounting/ financial procedures, and the different types of healthcare institutions (profit, not for profit, gov

what are the uses of profit for health care organizations

maximization of salaries, maximization of return on investments, return on equity, return on assets or return on net assets

consumer price index

measures changes in the price level of a market basket of consumer goods and services purchased by households

a ___ ____ must be used for recording all financial events that affect the organization

monetary denominator ($)

Gross Domestic Product (GDP)

monetary value of all the finished goods and services produced within a country's borders in a specific time period

define revenue

monies received or earned in exchange for goods/ services provided

refers to a period of less than one year

near-term, current, short term

purpose of the statement of cash flows

necessary disclosure of this "hidden" information, and provides a summary of all significant cash flows relating to operating, financing and investing activities

the first item listed on healthcare financial statements and reflects the adjustments of charity care and contractual adjustments is known as

net patient service revenue

is equity cash?

no cash is different from equity

is there a perfect mix of liquidity and solvency?

no, if you keep too much of the assets liquid you are not investing and making money like you should be. If not enough assets are liquid you can go bankrupt. Different for every company

revenue and expenses are __ accounts

nominal

non-monetary obligations

obligations to provide goods or services, rather than cash, where the liability is generally valued at the amount received rather than the cost of providing that item

the business entity

often an incorporated organization, similar to a person it can take on debt/ possess a credit score. All matters viewed from entity POV

statement of cash flows equation

op

statement of cash flows equation

operating + investing + financing activities = change in cash

Why are generally accepted accounting principles (GAAP) needed?

otherwise accountants will "create the history of a company" using one technique while another uses a different method, which can be hard to compare when examining both

the "donut hole" was fixed in 2003 with the addition of medicare part

part D

the two overriding goals of financial management are __ and ___

profitability and viability

profitability vs liability

profitability is how much an organization makes off their services each year but viability is if the organization will last with the profits they get each year. you can have profitability without viability but not the other way around

the sarbanes oxley act

provides protection for whistleblowers requires periodic rotation of auditors requires disclosure of conflict of interests

qualitative characteristics to rules of accounting

relevance, reliability, comparability, understandability

define net revenue

remaining revenue (if any) after accounting for expenses incurred/ paid, after deductions

full disclosure

reports should disclose any information needed to ensure that they are fair representations

explain the following GAAP principle: conservatism

requires that sufficient attention and consideration be given to the risks taken by the organization, Anticipate potential losses/ gains for the organization, protection from future loss (basically protect the organization)

explain the following GAAP principle: materiality

requires the accountant to correct errors that are "material" in nature (large or significant) within the financial statement

tangible assets

resources owned by the organization that have physical form (historical value)

net assets without donor restrictions

result from donations given without restrictions and from operating profits. They are available to use as the organization sees fit

statement of operations equation

revenue - expenses

statement of operations equation

revenue - expenses = net revenue provides revenue and expenses information to demonstrate the change in organization net wealth

accrual accounting is when

revenue is earned and expense is incurred

matching prinicple

revenues received by the hospital are "matched" with the accounting period which they are earned expenses paid by hospital are matched with the revenue they are related

define inflation

rise in the general level of prices

what do accountants mean when they say "short term" vs "long term"

short term is less than one year and long term is more than one year

cash flow statement

shows the sources and uses of the organizations cash

Replacement (current) cost

similar to fair value, yet also includes depreciation to date

accounting cycle

source documents journal entries posting into ledgers trial balance financial statements

explain GAAP accounting principles

standards that encompass the details, complexities, and legalities of business and corporate accounting. The Financial Accounting Standards Board (FASB) uses GAAP as the foundation for its comprehensive set of approved accounting methods and practices

going concern

statements are prepared based on assumption of longevity. If that is not likely the case then it must be disclosed.

primary functions of finance accounting

supervises the acquisition and disposition of an organizations resource; specifically cash formalized system designed to record the financial history of the care organization (looks backwards)history in dollar signs

assets may either be __ or __

tangible (physical form) or intangible (no physical form like reputation, credit scores, etc.)

balance sheet

tells the financial position of the organization at a point in time

explain the following GAAP principle: cost

the amount that was paid to acquire an asset (aka purchase price or historical cost) used for all assets on financial statements

explain the following GAAP principle: going concern

the assumption that a business will remain in operation indefinitely (aka ongoing viability)

what is financial position

the current day health of an organization

what is contractual allowance

the difference between the providers charge and the negotiated rate

define liability

the economic obligations an organization has. Can be owed to external agencies like vendors, bank loans, taxes, etc. (assets as a whole can be pooled together to pay liabilities

monopoly

the exclusive possession or control of the supply or trade in a commodity or service.

explain the relationship between finanical risk and financial return

the greater the risk the greater the return

intangible assets are not accounted for unless

the intangible asset has a measurable value "goodwill". It shows objectively, what was paid for intangible assets

the reason for government regulation is

the market cannot allocate resources effectively

explain the following GAAP principle: consistency

the organization must pick specific subjective actions, and stick with them, any changes because of the change must be addressed.

fiscal year end

the organizations year end should occur at the slow point in the organizations normal activity to reduce disruption caused by determining the organizations result of operations and year end financial position

define asset

the resources owned by the organization, it is anything that has economic value and can help the patient directly or indirectly

financial period

the timeframe used to generate financial statements during the organizations existence

what is an accounting entity

the unit for which we wish to accountUsually within a larger entity, it can be a department, project or organization

liability valuation

the value of liabilities depends on wether the liability is short term or long term and whether or not they are to be paid in cash

define equity (net asset/ net worth)

the value of the organization to its owners. The portion of assets available to the owners of the organization after all liabilities have been paid.

cost

the value of what was given up to acquire the item

insurance companies and government agencies that pay the majority of the cost of treating patients are known as

third party payers

AR Net Realizable Value

total AR (volume x charges) - revenue deductions = AR net

all elements of a financial event are known as

transaction

what are operating activities

transactions directly and indirectly related to the provision of healthcare services to patients, generally result from revenue and expense transactions that determine net income inflows: A/R, cash receipts outflows: salary, interest expense

what are financing activities

transactions related to the acquisition and repayment of resources obtained through short/ long term borrowings inflows: cash principle from the loan outflows: interest payments on the debt

what are investing activities

transactions related to the purchase of sale of securities (not cash equivalents) and plant assets inflows: dividends/ stock distributions outflows: initial purchase of these assets

purpose of insurance

transfer risk

Accumulated depreciation is a contra-asset account.

true

Depreciation expense gets zeroed out after a financial reporting period for an organization.

true

Double entry means that it is not possible to change one side of the accounting equation without changing the other.

true

Na is not cash on hand (T/F)

true

There is always a trade off between profit and risk.

true

accrual accounting is much less open to manipulation of profits

true

delaying or accelerating payments will no impact expenses is using accrual based accounting

true

delaying or accelerating payments will not impact expenses if using accrual based accounting

true

depreciation is known as "tax shelter" and is completely legal

true

fraud usually makes no difference or impact on an organizations balance sheet

true

higher risk ventures should bring higher returns

true

marketable securities are current assets

true

net realizable value is based on someones subjective estimate of what the entity could be sold for

true

no matter which depreciation schedule is used the journal entires for the initial purchase will remain the same

true

non profits have to have CPA audited financial statements

true

non profits need to disclose how liquid their organization is

true

non-profits need to disclose how liquid their organization is

true

owners equity and net assets are the same thing in accounting terminology

true

the SEC is concerned with correct arithmetic and consistent accounting practices

true

the accounting equation must always remain in balance

true

the strength of historical cost valuation is that it is objective and verifable

true

using the accrual method will require a statement of cash flows

true

whether for profit or not for profit health organizations need profits

true

reforms impact on financial accounting

typically statement of operations begins with n"et patient service revenue" but in healthcare operations because of non GAAP regulations the revenue section starts with "gross patient service revenue"

consistency

use of the same accounting principles and methods from period to period within a company

notes to the financial statements

vital information supplementing the key financial statements

double entry requirement

what you do to one side you have to do to the other side of the balance sheet

investment decision thoughts

which assets to acquire made by divisional managers and top management

the "near term" or "current" in accounting means

within a 12 month period