Answer:
The cash basis of accounting is a relatively simple approach to recording revenues and expenses. It is like using a personal checkbook. Your checkbook balance helps you know exactly where you stand. Unfortunately, the approach does not necessarily allow for the best assessment of an organization's profitability for a period of time.
Accountants believe that the accrual basis of accounting does a better job measuring profits for a specific period of time. The accrual method requires an organization to record revenue in the accounting period that care has been provided even if it has not collected payment in cash yet, and record the costs related to providing that care in the same period, even if it has not yet paid for the resources it consumed. Most health care providers do use the accrual basis of accounting.
Answer found on page: Chapter 5, page 132-133
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Terms in this set (48)
Accounting
systemic recording and reporting of financial transactions
bookkeeping
process of keeping detailed records of financial transactions
Accounts Receivable
money owed to the practice
accounts payable
money the practice owes
cash disbursements
Cash payments made by a business.
what is a major disadvantage of single entry bookkeeping systems
there is no method to crosscheck for accuracy of recording and calculations
patient ledger
keeps track of all the charges and payments for each individual patient
how often are charges and payments posted to patients accounts
daily
what type of codes appear on office itemized charge slips
both diagnosis and procedure codes
how would you find the usual charge for a procedure
fee schedule
what does it mean to close the day
no further account receivable charges, or adjustments can be made using that date
what types of accounting duties are performed by independent companies outside of the medical office
preparing payroll checks or tax returns
what does it mean to reconcile a bank statement
the bank records and medical office records are in agreement
reasons why the bank statement may NOT agree with the office record for a checking account
the office may have written more checks than usual during a month
Which account keeps a record of cash disbursements
accounts payable
superbill
itemized charge slip
blank endorsement
simple signature of the party to whom the check was written; once signed anyone who has the check can cash it
special endorsement
begins with a statement of the party to whom the check should be paid
"pay to the order of"
restrictive endorsement
specify how the check can be paid out
ex: for deposit only
When is income calculated in the cash basis of accounting?
at the time a patient bill is paid
day sheet (daily journal)
keeps chronological record of transactions
example of debit adjustment -increases the amount the patient owes
check returned by the bank for non-sufficient funds
How should checks that are received by the medical facility be endorsed?
restrictive endorsement
what determines the legal amount of money to be drawn on a check
the amount written in words
what is an example of a credit
a patient is given a discount for paying in full at the time of service
when can a signature be used to endorse a check
when the check will be deposited
Liabilities
money owed to others by the business
accrual method of accounting
income is entered at the time of sale, even if payment has not yet been recieved
payee
the person to whom a check is made out to
ABA routing number
number on the bottom of the check that identifies the accounts financial institution.
who assigns the ABA routing number
American Bankers Association
petty cash account
cash on hand to pay for small items
-delivery, postage due, parking, cookies
what is created at the same time if a manual day sheet is used?
itemized slip for a bank deposit
how are transactions recorded on the day sheet?
charges, payments, previous balance, adjustments, and new balance. new sheet used each day
what can an online bill system reduce
the number of checks written
what types of accounting duties are performed by staff of the medical office
managing daily finances
most office computer billing programs are based on what type of bookkeeping system
pegboard
who is responsible for checking the boxes on a charge slip for services provided
the physicians or other providers who see the patient
what is a payment?
type of entry on an computerized bill thats paying on a patient bill
define proof of posting and where will you see it?
the process of calculating and comparing various figures on the day sheets to check for correctness
what is a money market account? how do they compare with checking accounts? can you give examples of things that might be paid out of this type of account
funds
available with a few more restrictions.
Large equipment, expensive equipment, malpractice insurance, professional licenses
cashier's check; whom is the check drawn on? can you give examples of what it might be used for
check drawn on a bank itself rather than an individual account
why do we use a cashier's check
more reliable than a regular check
when preparing a bank deposit slip, what should be included from each check on the deposit itemization record
amount that is being deposited, check numbers, patient ID number
MICR
magnetic ink character recognition
what is included in the MICR
ABA routing number, account number, and check number
define pegboard system for check writing, specifically when used to pay bills information about each check should be recorded simultaneously on what?
a type of manually accounting system. written simultaneously records on the account payable ledger
What is a bank deposit slip?
check numbers, the amounts, the account number being deposited into, total amount of deposits and itemized listing
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