Accounting Practices and Entries
Financial Matters for Health Care Professionals
February 1, 2009
Financial matters or accounting procedures are a daily part of running any business. Whether that business is a mom-n-pop hardware store or a large medical center that serves hundreds of thousands of patients a year, tracking finances is an important part of daily business.
Accounting practices and principles are at the heart of financial management. To understand the financial transactions of healthcare organizations it is necessary to understand the different types of accounting practices and how entries are made and items recorded using each practice. Accrual accounting, cash flow accounting, and fund accounting are three practices used by healthcare organizations to manage finances.
According to the Bureau of Labor Statistics (2008-09), accountants and auditors help to ensure that the Nations firms are run efficiently, its public records kept accurately, and its taxes paid properly and on time.
All accounting transactions are recorded through journal entries that show account names, amounts, and whether those accounts are recorded as a debit or credit side of accounts. Debits include all money or revenue going out and credits are all money or revenue coming in.
Accrual accounting, in simple terms, means that a profit is recognized at the time that a service is rendered and not when the actual monies are given or taken away. For example, when a patient is cared for in a hospital and receives treatment because they have insurance, that service is recognized as a profit just as if that very patient were to have paid cash for the same treatment. Hospitals provide services for specific fees; these fees are either paid for out-of-pocket or through some type of insurance. Revenue is realizable because it is reasonable to expect that cash will be received in the future.
Accrual transactions are typically entered into...