Finance Ch 2 Questions

What are each of the major financial statements commonly called in NOT-for-profit healthcare entities?

1. Balance Sheet 2. Statement of Operations 3. Statement of Changes in Net Assets 4. Statement of Cash Flows

What are each of the major financial statements commonly called in FOR-profit healthcare entities?

1. Balance Sheet 2. Statement of income and comprehensive income 3. Statement of changes in Stockholder's Equity 4. Statement of Cashflows

Describe the three major functions common to all financial statements?

A. Heading, Body, & Notes B. Each financial statement has a heading, which gives the name of the entity, the name of the statement, and the date or time covered by the statement.

What is the primary accounting equation that describes the balance sheet of a not-for-profit, business-oriented healthcare entity?

Assets = Liabilities + Net Assets Assets = Liabilities + Stockholders' Equity

Balance Sheet: What are some examples of deferred revenue?

Capitated payments

Statement of Cash Flows: What are the statement's main sections?

Cash flows from operating activities Cash flows from investing activities Cash flows from financing activities Net increase (Decrease) in cash and cash equivalents

Balance Sheet: What is deducted from gross patients accounts receivable to arrive at net patients accounts receivable?

Contractual Allowances Charity Care

Statement of Operations: What are the major reductions of revenue taken to get from gross to net patient service revenue?

Contractual Allowances Charity Care Provision for bad debts

Statement of Cash Flows: What is the purpose of this statement?

Explains how changes in balance sheet accounts and income affect cash and cash equivalents, and breaks the analysis down to operating, investing and financing activities.

Balance Sheet: What are its main sections in NOT-for-profit HC entities?

Heading, body, & notes entities assets, liabilities, & net assets

Balance Sheet: What are its main sections in FOR-profit HC entities?

Heading, body, & notes entities assets, liabilities, & stockholders equity

Where in the the financial statements does important explanatory information appear?

Notes section

Statement of Operations: How do net assets get released from restriction?

Reclassified from restricted accounts like temporary to unrestricted accounts. Donors may specify it, or time expires. The amount is deducted from the restricted account and added to the unrestricted revenue.

Statement of Operations: What is the performance inidcator

Required by FASB which is an "intermediate level that reports the results of the entities operations"

In which financial statement would an entity identify its purchase of long-term investments?

Statement of Cash Flows under "cash flows from investing activities"

What is a statement of operations?

Summarizes the entity's revenues and expenses over a period of time.

What is a balance sheet?

Summarizes the entity's total assets, liabilities, and net assets at a particular point in time.

Statement of Changes in Net Assets: What is the difference between permanently restricted and and temporarily restricted net assets?

Temporarily restricted assets are those that are donated subject to restrictions that are limited to a specific period of time. Permanently restricted assets are donated items that have limitations on use that are attached to it for perpetuity (forever).

Balance Sheet: What is the name of this statement in NOT-for-profit entities?

The Balance sheet for both entities.

How does the accrual basis of accounting differ from cash basis of accounting?

The main difference between accrual and cash basis accounting is the timing of when revenue and expenses are recognized. The cash method accounts for revenue when "RECEIVED" and for expenses when "PAID". Accrual accounts for revenue when "EARNED" and for expenses are "INCURRED".

Statement of Changes in Net Assets: What is the purpose of this statement?

To explain why there was a change from one year to the next in the entire net asset section of the balance sheet

Balance Sheet: What kind of restrictions are put on net assets?

Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets

Statement of Changes in Net Assets: What are the main sections of this statement?

Unrestricted net assets (Changes) Temporarily restricted net assets (Changes) Permanently restricted net assets (Changes)

Statement of Operations: What are the main sections of this statement?

Unrestricted revenue Expenses