Principles Of Non-Profit Accounting

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board of trustees

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the non-profit hospital's governing body; the ultimate authority and responsibility for the proper and prudent management of the hospital's affairs

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hospital accounting functions as an...

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information system; is is the source of info absolutely essential to the management of the individual hospital and to the functioning of the hospital industry

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hospital accounting (3 aspects)

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1. accumulation

2. communication

3. interpretation

of historical and projected economic data relating to the financial position and operating results of a hospital enterprise, for purposes of decision making by its management and other interested parties

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accumulation (as part of hospital accounting)

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refers to the process of RECORDING and CLASSIFYING the business transactions and financial events that occur in the economic life of the hospital--the BOOKKEEPING aspect of the accounting function

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communication (as part of hospital accounting)

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REPORTING recorded info to those who use it. Routinely reported in financial statements (balance sheets and statements of operations)

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interpretation (as part of hospital accounting)

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effort made by accountants to ANALYZE and EVALUATE reported info so that it may be better understood and more easily used by decision makers

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Much of the info recorded and reported thru the accounting process is...

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HISTORICAL

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what do Balance Sheets do?

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report financial position info

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what do Statement of Operations report?

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Info relating to operating results FOR A SPECIFIC PERIOD OF TIME

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What do Statements of Changes in Net Assets report?

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he summary reason for the changes in the 3 most common net assets

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what do Statements of Cash Flows report?

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the basic reasons for the changes in the organization's short-term balance sheet cash

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internal control system

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comprises the plan or organization and all of the coordinated methods and measures adopted w/in a business to safeguard its assets, check the accuracy and reliability of its accounting data, promote operational effieciency, and encourage adherence to prescribed managerial policies

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Assets:

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the economic resources of the hospital that are recognized and measured in conformity with GAAP

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Types of Assets:

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1. Cash

2. Accounts receivable

3. Inventory

4. Prepaid expenses

5. Long-term investments

6. Land, buildings, and equipment

7. Accumulated depreciation

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Accounts receivable:

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reps the amount of money due the hospital from patients and their 3rd party sponsors for services provide to them but for which the hospital has NOT YET BEEN PAID

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Inventory:

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the cost of food, fuel, drugs, and other supplies purchased by the hospital but not yet used or consumed

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Prepaid expenses:

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include expense items such as insurance, interest, and rent that have been paid in advance--are assets in the sense that their prepayment will provide future benefits

ex. insurance, use of leased equipment

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Longterm investments:

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rep the cost of governmental and corporate securities that the hospital owns and intends to hold for a period of time in excess of one year

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Accumulated depreciation:

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reflects the amount of plant asset costs consumed by the use of the assets and treated as an operating expense of the hospital during the time that has elapsed since the assets were acquired

*this value is deducted from the cost of the plant assets

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Current assets:

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Cash + other assets that will be converted into cash or consumed by operations w/in 1 year from the balance sheet date

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Noncurrent/Long-term Assets:

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all other assets that won't be converted to cash or consumed w/in 1 year

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Sequencing of Assets listed from ..... to ....

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Most liquid assets (cash) to least liquid assets (land, buildings, and equip)

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Liabilities:

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the economic obligations of the hospital that are recognized and measured in conformity w/ GAAP

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Types of Liabilities

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1. Accounts payable

2. Notes payable

3. Accrued expenses payable

4. Deferred income

5. Long-term liabilities

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Accounts payable:

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(liability) amounts owed by the hospital to suppliers and other trade creditors for merchandise and services purchased from them but for which the hospital has not yet paid

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Notes payable:

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(liability) short-term borrowings by the hospital from banks and other financial institutions--usually in the form of promissory notes issued by the hospital to the lender

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Accrued expenses payable (aka "accrued liabilities"):

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(liability) liabilities for expenses that have been incurred by the hospital but for which the hospital HAS NOT YET PAID

ex. wages, salaries

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Deferred income:

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(liability) income that has been received in cash by the hospital but that the hospital HAS NOT YET EARNED and for which it is obligated to provide some specific SERVICE IN THE FUTURE

ex. tuition

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Long-term liabilities:

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mortgage loans or hospital bond issues not retired in the near future (longer than 1 year)

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Sequencing of liabilities listed from.... to ....

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more or less in the order in which they will be paid

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Excess of revenues over expenses (aka "net income", "net margin"):

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difference b/w revenues and expenses of the period

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Revenue:

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Earned income

ex. cash received for a service

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Expenses:

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costs of services, supplies, and other items purchased and consumed by the hospital in the provision of patient care services during a given period of time

*only when supply items are CONSUMED in hospital activities are their costs RECOGNIZED and REPORTED as EXPENSES by the hospital