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PRACTICE FINANCES Chapter 8 © 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED.
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Transcript of PRACTICE FINANCES Chapter 8 © 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED.
PRACTICE FINANCES
Chapter 8
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
LEARNING OUTCOMES: WHEN YOU FINISH THIS CHAPTER YOU WILL BE ABLE TO
8.1 Explain, using accounting terminology, the procedures for maintaining two essential financial records.
8.2 Summarize the main focus of the Red Flag Requirements as they relate to the medical office as a business.
8.3 List three banking duties of the administrative medical assistant.
8.4 Explain how an employee’s net salary is determined.
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-2
absolute accuracy
blank endorsement
accounting bookkeepingaccounts payable (A/P)
cash basis
accounts receivable (A/R)
charge/receipt slips
accrual method daily journalaging reports deductions
annual summary deposits
audit direct earnings
balance sheet EFT
blank reconciliation employer identification number (EIN)
e-signature monthly salary Restrictive endorsements
FICA patient ledger cards
e-signature payroll
full endorsement petty cash fund
FUTA posting
income statement practice analysis report
indirect earnings procedure day sheet
interest Red Flag Requirements
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
KEY TERMS
8-3
KEY TERMS (CONTINUED)
absolute accuracy -- correctness that is 100 percent
accounting -- the methodical recording, classifying, and summarizing of business transactions
accounts payable (A/P) -- ledgers record expense amounts owed to a supplier or creditor
accounts receivable (A/R) -- ledgers record the balance of payments due from patients or others (third-party payers)
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-4
KEY TERMS (CONTINUED)accrual method -- income is recorded as soon as it is
earned, whether or not the payment is received, and expenses are recorded when they are incurred
aging reports -- This analysis lists the amounts of money owed to the practice, and the report is organized according to the number of days
annual summary -- provides the monthly charges and payments for an entire year
audit -- review of all financial data in order to ensure the accuracy and completeness of the data
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-5
KEY TERMS (CONTINUED)balance sheet -- the financial statement for a particular date
that indicates the total assets (possessions of value, such as equipment), liabilities (debts), and capital (available dollars)
bank reconciliation -- new balance on the statement must be compared with the checkbook balance to determine whether there is a difference between the amounts
blank endorsement -- the signature of the person to whom the check is payable (the payee) is placed on the back of the check
bookkeeping -- the part of accounting that is the accurate recording of transactions
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-6
KEY TERMS (CONTINUED)
cash basis -- charges for services are not recorded as income to the practice until payment is received and expenses are not recorded until they are paid
charge/receipt slips -- provide a record of the physician’s services
daily journal -- is a record of services rendered, daily fees charged, payments received, and adjustments
deductions -- subtracting from gross amounts
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-7
KEY TERMS (CONTINUED)
deposits -- checks and cash placed into the account belonging to the practice
direct earnings -- are salaries (fixed amounts paid regardless of hours worked) or wages (pay based on an hourly or daily specific rate) paid to employees
EFT -- Electronic Funds Transfer - direct deposit, the employee’s net pay is automatically withdrawn from the practice’s account and deposited into the employee’s account
employer identification number (EIN) -- enables the IRS to track the financial activity of employers in meeting payroll and tax obligations
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-8
KEY TERMS (CONTINUED)
e-signature -- is a unique identifier, or “signature,” created for each person through computer code
FICA -- Federal Insurance Contributions Act -- law requires that a certain amount of money be withheld for Social Security
full endorsement -- indicates the person, company, account number, or bank to which the check is being transferred, followed by the payee’s name
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-9
KEY TERMS (CONTINUED)
FUTA -- which is used to help those who have been without work for a specified time as they seek new employment
income statement -- shows profit and loss for a stated period of time, such as a quarter or year
indirect earnings -- are paid leaves or specific employer-paid benefit programs
interest -- an accrual of money during a committed time
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-10
KEY TERMS (CONTINUED)
monthly summary -- shows the daily charges and payments for an entire month
patient ledger cards -- contain a patient’s name, services rendered, charge, payment, and balance
payroll -- total earnings of all the employees in the practice
petty cash fund -- small amounts of cash (such as $40–$100) to be used for small expenses
posting -- to enter data accurately the first time on a record
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
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KEY TERMS (CONTINUED)
practice analysis report – to analyze the revenue of the practice for a specified period of time
procedure day sheet -- lists numerically all procedures performed on a given day
Red Flag Requirements -- the medical practice must make sure that persons presenting for services are who they say they are
Restrictive endorsements -- is “restricted” by being marked “For Deposit Only.” The use of the check is thus limited because the party to whom the money should be paid and the purpose have been stated
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
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The financial records that are used daily in the practiceThe daily journalCharge/receipt slipsLedgersSummaries
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-13 8.1 EXPLAIN, USING ACCOUNTING TERMINOLOGY, THE PROCEDURES FOR MAINTAINING TWO ESSENTIAL FINANCIALRECORDS
8.2 SUMMARIZE THE MAIN FOCUS OF THE RED FLAG REQUIREMENTS AS THEY RELATE TO THE MEDICAL OFFICE AS A BUSINESS.
Just as HIPAA regulations were implemented to protect patients’ nonpublic personal data, new regulations, known as Red Flag Requirements ,focus on identifying and verifying individuals in relation to information presented to the practice.
Who Must Comply: financial institutions creditors
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
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8.3 LIST THREE BANKING DUTIES OF THE ASSISTANT
Three banking duties performed by the assistant are Accepting valid checks in payment for services
rendered Depositing cash, checks, and other forms of payment
into the practice’s account(s) Reconciling bank statements
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
8-15
8.4 EXPLAIN HOW AN EMPLOYEE’S NET SALARY IS DETERMINED.
Calculating gross earnings Determining the proper exemptions Subtracting FICA tax Subtracting voluntary deductions Subtracting the total deductions from the gross
earning Posting the taxes
© 2012 THE MCGRAW-HILL COMPANIES, INC. ALL RIGHTS RESERVED
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