Chapter 33 Accounts Payable and Accounting Procedures

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net collection ratio

adjusted collection ratio

Assets

money and items of value in a business

Accounts Payable

money owed by a company to its creditors. (Outstanding bill owed for products, )

explain comparing shipments to packing lists or invoice nis important.

to cross reference what you ordered against what you received. (for accuracy)

why is it important to know the networth of a business?

the networth will let you know the business profit after loss and expenses. (all company expenses)

Explain why collection ratios might be important to a physicians office.

to know how often are we (physicians, office, hospital) having a turnaround. (ex: insurance reimbursement...best time frame 30-45 days)

A/P (Accounts Payable)

total amount owed by practice to supplier

Cost ratio equation

total expenses ÷ total numbers of procedures for one month (ex: $50,000÷$10,000(monthly gross) =5)

net collection ratio equation

total payments (A/R) ÷ Total charges - write offs (ex:$10,000(totally payments ÷$50,000(total charges)-$500(write offs)= -$498

managerial

(adj) relating to a manager or management

Balance Sheet

A financial statement that reports assets, liabilities, and owner's equity on a specific date.

what charges are considered when deemed uncollectible? provide 2 examples.

Deemed uncollectible is insurance denied. if insurance cancelled, if patient moved, or patient deceased (go after the money)

Please Excuse My Dear Aunt Sally

Parenthesis, Exponents, Multiplication, Division, Addition, Subtraction

Gross collection ratio

Total Payments (A/R(accounts receivable)) ÷ Total Charges (ex: $8,000(total payments) ÷ $4,000(total charges)= 2

Name 2 types of collection ratios most frequently used in a medical officer.

accounts receivable ratios (shows money that was paid) and cost ratio

petty cash

a small amount of stores money, ranging from $25-$75

invoice

an acquired material in exchange for money. (bill)

Basic Accounting formula (Equation)

assets- liabilities = networth (ex:.$300,000(asset)- $175,000(liabilities)=$125,000(networth) ÷ 12 months= $10,416.66 ÷ 4 weeks=$2,604 ÷40hrs=$65)

Liabilities

assets-liability

what are three steps of cost-benefit analysis?

come up with an option, determine the cost decision (how much is it going to cost?), calculate benefit.

Describe what should be done when a shipment item does not match the invoice.

contact the vendor and track the shipment

A/R ratio equation

current A/R (accounts receivable) balance ÷ average monthly gross production

A/R (Accounts Receivable) ratio

current A/R balance ÷ average monthly gross production

net worth

debts or a/p (accounts payable) owed by the business

Income Statement

demonstrates the profit and expenses for a given time period

cost-benefit analysis

demonstrates the profit and expenses for a given time period

Expidenture

documents with itemized good or services

For what purpose is petty cash used?

emergencies (small item supplies)

Equity

fairness

cost ratio

formula that shows the cost of a procedure or service and helps determine the financial value of maintaining certain services

Explain what income statements and balance sheets demonstrate to a medical practice.

income statements are monies in the company revenue and balance sheets are a list of charges and procedures.

voucher

instrument authorizing a cash payment.

write offs

negative adjustments to patient accounts


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