Ait Accounting Domain

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Accounting

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The process of identifying, recording, and communicating economic events regarding the financial position and results of operations of a business to interested users.

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Accounts Payable

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Amounts owed to suppliers for goods and services.

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Accounts Receivable

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Amounts owed to the facility for services or for the sale of goods.

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Accrual Basis of Accounting

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system of accounting in which revenues are recorded in the period earned, and expenses are recorded in the period incurred even if cash is received or paid in a later or earlier time period.

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Assets

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An economic resource owned, i.e. cash, receivables, equipment, buildings.

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Audit

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Examination of accounting systems, controls and records used to prepare financial statements according to legal or professional practices.

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Bad Debt (Uncollectible Account

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An account receivable determined to be uncollectible.

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Balance Sheet (Statement of Financial Position)

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A report summarizing a firm's assets, liabilities, and owners' equity at a specific date.

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Bidding

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The process of requesting from vendors a response (bid or offer) to provide goods or services according to written specifications. The bidding may be closed (directed to select bidders) or open (to all bidders). The bids may be negotiated (as to price, payment terms, etc.) before a contract is finalized.

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Bonds

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Interest bearing notes, usually in $1,000 or $5,000 amounts which the issuer (borrower) promises to repay the lender the principal and interest according to a schedule.

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Break-Even Point

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The point at which total revenues for a firm or a program are equal to the total expenses incurred.

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Budget

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This is a financial plan for a period of time such as a year.

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Capital Budget

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A financial plan prepared to provide for replacement or additions to property, plant, and equipment. These expenditures are for assets which have a service life greater than one year.

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Cash Basis of Accounting

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A system of accounting in which revenues are recorded when cash is received, and expenses are recorded when cash is paid.

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Cash Flow

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inflows from collections of revenues and other sources minus cash outflows for payments of expenses and liabilities.

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Chart of Accounts

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A list of account names and numbers used by a facility, typically organized by assets, liabilities, owner's equity, revenues, and expenses.

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Cost Center

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A unit charged with responsibility for controlling its own costs.

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Cost Shifting

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Practice by health care providers of charging private-pay patients more than the actual costs of their care, in order to compensate for shortfalls in payment for patients covered by Medicaid and other government programs which may pay less than actual costs.

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Depreciation

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The systematic allocation of the cost of a fixed asset to expense over its useful life.

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Equity

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The excess of a firm's assets over its liabilities.

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Expenses

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The cost of services and goods (assets) consumed in producing revenues.

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Financial Ratio Analysis

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Examination of the relation of two pieces of financial information to obtain additional information about the financial health of an organization. Ratios are classified into solvency, activity, and profitability groups.

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Fixed Assets

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Assets which have an estimated useful life in excess of one year; e.g., land, land improvements (such as paving and lighting), buildings, equipment.

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Fraud

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Deliberate deceit by providers or consumers in obtaining payment for services that were not actually delivered or received, or in claiming program eligibility. To be distinguished from abuse, which refers to improper or excessive use of program benefits, resources, or services by either providers or consumers. Abuse is not necessarily intentional or illegal.

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General Journal

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Used for entries, including adjusting entries, that do not properly belong in any of the other journals.

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General Ledger

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A group of all accounts including assets, liabilities, revenue, expense and owner's equity.

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Goodwill

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If one firm acquires another firm for a price greater than the market value of the acquired firm's assets minus its liabililities, this excess is recognized as an intangible asset.

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Historical Cost (or Acquisition Cost)

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Cost of acquiring a depreciable asset, which includes the purchase price, taxes, shipping, assembly and installation.

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Income

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An increase in owner's equity resulting from services rendered or goods provided.

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Invoice

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Document that describes goods sold or services rendered and the terms for payment.

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Journal

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This is the first record of transactions. Entries are in chronological order. A separate one is generally maintained for the following categories of transactions: cash receipts, cash payments, revenues, purchases, accounts payable and general purposes

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Lease

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A contract requiring the lessee (user) to make periodic payments (rentals) for a specified period of time to the lessor (owner) for the use of an asset. Types include: operating (generally for a short term or limited number of years) and capital (a long-term agreement extending generally for the entire life of equipment or property).

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Liabilities

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Debts owed by a firm to persons or firms other than its owners. These are classified as current (if they are due within one year) and long-term if they are due more than one year from the balance sheet date.

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Line of Credit

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Form of financing in which a financial institution commits itself to make a loan up to a specified maximum amount.

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Note

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A written promise to pay a specific sum with or without interest at a fixed future date.

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Occupancy Rate

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The ratio of actual number of resident days to the total possible resident days related to capacity, usually expressed as a percentage. For example, if a facility has 100 beds and 80 are occupied for a day the the ratio is 80/100 or 80%. This may be reported as the average for a period, such as 30 days or a year. A resident's bed may be considered as an occupied bed even though that resident is in the hospital or temporarily discharged. The facility must be receiving a ''bed-hold'' or ''bed-reserve'' rate for that bed to be counted as occupied.

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Office of Inspector General (OIG)

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Office in the U.S. Department of Health and Human Services charged with identifying and eliminating fraud, abuse and waste in the Medicare, Medicaid, and other DHHS programs. It carries out this mission through a nationwide program of audits, inspections, and investigations, and through issuance of Special Fraud Alerts.

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Opportunity Cost

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It is the maximum alternative earnings that might have been obtained had resources been applied to some alternative use.

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Posting

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A step in the accounting process by which journal entries are transferred (posted) to accounts in the general ledger in order to summarize information such as cash on hand.

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Pro forma Statement

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A financial statement prepared from budgeted changes in revenues, expenses, assets and liabilities.

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Prospective Rate-Setting

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Practice of most state Medicaid programs of using predetermined rates to compensate nursing facilities without actively adjusting payment to cover actual costs. The states use a wide variety of methodologies to develop these rates.

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Purchase Order

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Document from a prospective purchaser requesting a seller to provide certain quantities of described goods or services at a given price, with payment to be made later.

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Restricted Funds

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Funds established to account for assets with uses limited by the requirements of donors or grantees i.e. plant replacement, plant expansion, endowment.

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Return on Equity (ROE)

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A means of assessing a company's profitability. It is calculated by dividing the firm's annual net income by total shareholders' equity.

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Revolving Loan

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Bank loan which is expected to be renewed on similar terms at maturity.

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Statement of Cash Flows

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Financial statement that displays how the cash balance has changed during a fiscal period. Cash increases and decreases are reported in three categories of activities: operating, investing, and financing. This information can be useful in assessing the entity's ability to generate positive future net cash flows, meet its financial obligations, and pay dividends.

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Straight-line Depreciation

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A depreciation method which allocates equal amounts of depreciation expense to each period of the asset's life.

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Third Party Payer

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Commercial insurer or other private or public entity which pays for all or part of the charges for a resident.

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Variance Analysis

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A control technique which evaluates the budgeted and actual expenses. A cost variance is a difference between budgeted and actual cost. A quantity variance indicates a difference between expected usage and actual usage. An efficiency variance occurs when the variance is due to an excessive use of inputs for each resident-day or other unit of output.

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Working Capital

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The excess of current assets over current liabilities

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Write-off

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Removing an uncollectible account from the accounts receivable. Bad debts expense is increased and the asset, accounts receivable, is decreased when this occurs.