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