Part 3 Focus Q&A Flashcards
What is an Assets?
P.187
Anything that the facility owns
What is a Liability?
P.187
Things owned by the facility, or its OBLIGATIONS
What is Capital?
P.187
Money INVESTED in the facility, also known as FACILITY NET WORTH
What is Revenue?
P.187
EARNINGS from OPERATIONS
What is Expense?
Costs of SALARIES, SUPPLIES, and so on. That have been USED UP. (Normally through a provision of services).
What is a Fund Account?
ANY funds that have been ESTABLISHED for restricted or unrestricted use.
What is the purpose for Numbering accounts. Example, RN Nurse Salaries is 5201.
Category 5 would = a Nursing Dept. Account
1 would = that it is a Salary account
1st number = Department. Last number = Type of account.
**Note that the salary expense account number for every other department ends with 1 also. This system of classifying accounts is useful, as it identifies every account of the facility and thus is a means of control;
What is a Cash Receipt Journal?
P.187
Records ALL CASH received for services provided. Example: Sales from a popcorn machine.
What is Billings Journal?
P.187
A LIST of ALL bills for SERVICES RENDERED.
What is the Accounts Payable Journal?
P.187
it is a Purchase Journal - It records ALL purchases made that WILL be paid with in the next FEW months (under a year)
What is Cash Disbursement Journal?
P.187
Records all payments MADE for SERVICES and SUPPLIES used for resident care and for all other operations of the facility.
What is Payroll Journal?
P.187
Summarizes all payroll checks distributed during the pay period.
What is the General Journal?
P.187
a record of non-repetitive entries.
The General Journal records transactions that do not properly fit into any of the other journals. Note that the first five journals all record cash transactions; the General Journal is used to make adjustments in the books to conform to the accrual system of accounting
In addition to adjustments for inventory, entries for depreciation and prepaid expenses are also recorded in the General Journal to reflect the cost of using the plant or equipment over the time period, as well as the amount of prepaid expenses used up.
A summary of the nursing home’s financial well-being, within a time period, is normally referred to as_____.
1-Financial Statements
2-Profit and Loss
3-Notes to changes in financial condition
4-Statements of change.
P.187
1-Financial Statements
**3 Main Financial Statements are: Cash flow, Balance Sheet, Income Statement.
- *GAAPs require that the financial statements include the following four reports
1. Income statement or profit/loss statement
2. Balance sheet, or statement of financial position
3. Statement of changes in financial position
4. Notes to the financial statements
If the administrator asked the bookkeeper for a LIST containing every account in the facility, the bookkeeper would hand the administrator the \_\_\_\_\_\_ 1-Books 2-Financial report 3-Chart of Accounts 4-General Journal
P.187
3-Chart of Accounts
The chart of accounts is simply a list of every account in the facility. The accounts are organized into five main groups: Assets, Liability, Capital, Revenue, Expenses.
If the administrator asks the accountant for the journals, the administrator wants to look at__________.
1-The Original Entries
2-The Assets
3-The Debts
4-Current summaries of income and out go.
1-Orginal Entries
The journals are the first place that transactions are recorded; they are the books of original entry. Each facility will have its own system of journals, but generally there are six journals: Cash Receipts, Billings, Accounts Payable, Cash Disbursement, Payroll, General.
What are DEBTS? and where do they go?
P.190 (Table 3.2) Left side of the Journal Entry They are: Increase in Assets Decrease in Liability Decrease in Capital Decrease in Revenues Increase in Expenses
What are Credits? and where do they go?
P.190 (Table 3.2) Right side of the Journal Entry They are: Decrease in Assets Increase in Liability Increase in Capital Increase in Revenues Decrease in Expenses
The new accountant informs the administrator that to simplify things, he has incorporated all purchases that will be paid for the next few years into the accounts payable journal. The administrator should _____.
1-Compliment the accountant
2-Ask for last years books to be conformed to the new system
3-Look for a new accountant
4-Ask that these purchases be transferred to the general journal.
P.188
3-Look for a new accountant
** Accounts payable Journal is ALL purchases that will be paid for within the next few months, NOT YEARS.**
What is the difference in the GENERAL JOURNAL and the GENERAL LEDGER?
P.192
General Journal is for transactions that is used to make adjustments, and don’t FIT into a proper category.
General Ledger is the collection of ALL the Journals including the general journal. The General Ledger can be thought of as a summary of all debits and credits contained in the journals for the time period. It usually has a page for each account in the Chart of Accounts.
What is Working Capital?
P.200
Current assets - Current liabilities = Working Capital.
This can also be considered the funds available to the facility year
If the administrator asks the accountant for a statement analyzing the financial position of the facility at the beginning of the fiscal year, the best statement to hand the administrator is the \_\_\_\_\_\_\_\_\_\_\_. 1-Statement of Profit and Loss 2-Statement of Net Worth 3-Balance Sheet 4-General Ledger
p.199
3-Balance Sheet
**Balance sheet shows the financial position of the facility for only one point in time.
It is a snap shot at the health of the facility because of
its relation with the income statement is the retained earnings, which usually include the net income in the net worth.
The certified public accountant end of year report for a 15 year old, 120 bed for profit facility with NO debt, shows an EXCESS of income over expenses of $95,000. The Owners would likely be __________
1-Very Pleased with the FACILITY performance
2-Very Displeased with the FACILITY performance
3-Generally Satisfied
4-Neutral
P.199-201
2-Very displeased with the facility performance
Working Capital + (Rev-Expenses)= (Current Assets - Current Liabilities)
WC + (95000) = CAssets - 0
No bills or Debt, there was also NO Investment into the facility
When asked whether funds are readily available for a $75,000, purchase and the accountant responds that the NET WORTH is WELL over $800,000 and to go ahead with the purchase, the administrator should____________.
1-Ask for a statement of working capital
2-make the purchase
3-Seek a vertical analysis
4-Amortize the purchase
P.200-201
1-Ask for a statement of WORKING CAPITAL
Working Capital = CURRENT Assets - Current Liabilities
Current assets remaining after current liabilities have been subtracted yields the amount of money that the administrator has at his/her discretion –“Working Capital”
Net worth is NOT a POOL of CASH .The funds recorded as net worth are monies that have been put into the facility at some time; it is merely a record of these funds, not cash available for operations or investment.
When the CFO identifies trends in measures of the facilities financial performance by comparing the same relationships for several time periods he is doing \_\_\_\_\_ 1-Comparison Analysis 2-Time period Analysis 3-Ratio Analysis 4-Trade-off comparison
P.202
3-Ratio Analysis
Ratio analysis allows the administrator to identify trends in many measures of the financial performance of the facility by comparing the SAME ratio RELATIONSHIP for several periods. can also be used to compare the financial performance of several facilitiesOne ratio itself reveals very little about the performance of the facility. Ratios must be compared either over time or with the rest of the industry
What is the Current Ratio?
P.202
Current Ratio = Current Assets / Current Liabilities
** Ratio greater than 1 shows a facility can MEET its CURRENT obligations.
A good rule of thumb is having twice as much working capital to Cover Assets , and then to invest. OR industry Standard. Anything more than a 2 you should think about INVESTMENTS.
However, interpretation of all ratios is relative to both past performance and industry averages
A facility has current assets of $403,898 and current liabilities of $367,000, what is the Current Ratio? 1-9 2-3 3-1.1 4-2.1
3-1.1
Current Ratio = Current Assets / Current Ratio
403,898 / 367,000 = 1.1
