Verified Document

Accounting Practices Depending On The Type And Essay

¶ … Accounting Practices Depending on the type and size of a particular health care facility, the generally accepted accounting principles (GAAP) used to conduct medical accounting can vary greatly, and these differences may have significant impact on the eventual delivery of medical services. According to the Financial Accounting Standards Board's (FASB) Accounting Standards Codification, which is "the source of authoritative generally accepted accounting principles (GAAP) recognized by the FASB to be applied by nongovernmental entities," a conflict of interest routinely occurs when "some health care entities recognize patient service revenue at the time the services are rendered regardless of whether the entity expects to collect that amount" (FASB, 2011). Individual doctors working within the confines of a small family practice, who have not fully incorporated, typically rely on cash-basis accounting, which is the "major accounting method that recognizes revenues and expenses at the time physical cash is actually received or paid out" (Investopedia, 2011). Using this accounting technique is simpler for small medical practices that operate on a local level, and allows the doctor in ownership to avoid the costs of hiring a professional bookkeeper. Cash-basis accounting also leads to a greater degree of financial manipulation, in the form of "under-the-table" payments and the misreporting of medicinal administration.

Large hospitals and medical care conglomerates...

This more flexible form of accounting enables major medical corporations, and other large entities such as university hospitals, to align their expenses with revenues while maintaining sufficient capital reserves. A recent set of amendments passed by the FASB aims to rectify this potential conflict of interest, by requiring "health care entities that recognize significant amounts of patient service revenue at the time the services are rendered even though they do not assess the patient's ability to pay to present the provision for bad debts related to patient service revenue as a deduction from patient service revenue (net of contractual allowances and discounts) on their statement of operations" (2011). The choice between cash-basis accounting and accrual accounting can result in very serious ramifications for medical centers, hospitals, and individual practices, and each method can produce entirely different income statements for the same set of financial circumstances.
Small family practices, which deliver comprehensive medical care within small to medium sized communities, have already deduced that cash-basis accounting allows them the opportunity to manage their tax liability by exercising…

Sources used in this document:
References

Accrual accounting (2010, May 09). Forbes Financial Glossary, Retrieved from http://www.forbes.com/sites/forbesfinancialglossary/2011/07/12/accrual-accounting/

Cash basis accounting. (2011, June 21). Investopedia, Retrieved from http://www.investopedia.com/terms/c/cashbasis.asp?partner=forbes-pf

Financial Accounting Standards Board of the Financial Accounting Foundation. (2011, July). Presentation and disclosure of patient service revenue, provision for bad debts, and the allowance for doubtful accounts for certain health care entities: A consensus of the fasb emerging issues task force . Accounting standards update: health care entities (topic 954), Norwalk, CT. Retrieved from http://www.fasb.org/cs/BlobServer?blobcol=urldata&blobtable=MungoBlobs&blobkey=i'd&blobwhere=1175822797036&blobheader=application/pdf
Cite this Document:
Copy Bibliography Citation

Related Documents

Accounting What Is Accounting Is a Term
Words: 1208 Length: 3 Document Type: Essay

Accounting What is Accounting Accounting is a term which is usually referred to when there is a formalized manner to hold an individual, firm or other organization to account. The process of accounting will usually involves the collection of data that measures or quantifies actions or transactions, to allow for an evaluation or assessment of performance. The most common type of accounting will be used to measure and quantify financial data. A

Accounting Systems There Are Many Ways in
Words: 971 Length: 4 Document Type: Essay

Accounting Systems There are many ways in accounting to get the job done right but two basic approaches give accountants a foundation to work upon. The purpose of this essay is to examine the differences between manual and computerized accounting systems. This essay will explain the history and development of both types of systems and will break down the advantages and disadvantages of them as well. Explanation and History of the Manual

Accounting in British Petroleum Scope, Aims, and
Words: 939 Length: 3 Document Type: Essay

Accounting in British Petroleum Scope, Aims, and Objectives The research project proposed herein will examine the role of accounting in the past progression and current situation of British Petroleum, the company that came under intense public scrutiny last year due to the Deepwater Horizon oil spill that occurred in the Gulf of Mexico (Urbina 2010). In the ensuing year since the accident in the Gulf, however, interest in BP and its internal

Accounting Theory
Words: 3495 Length: 11 Document Type: Essay

Accounting Theory Over the year, the world scholars continue to evaluate the economics of the world to understand their functioning. In this course, they developed the subject of accounting to assess the frameworks of financial principles. The accounting theory in discussion involves reviewing the historical foundations of financial reporting and creating new models of reporting the financial developments and exchanges (Richards, 2009, p. 17). Accounting theory evolves continually; thus, there are

Accounting for Decision-Making
Words: 2947 Length: 10 Document Type: Case Study

Accounting for Decision Making Shelter Partnership's Case Study Purposes of Cost Information The intended purpose of cost information is to provide a basis for determining the expenses and revenues associated with a particular activity (or cost object). Generally, cost and income is measured in order to determine net income or profit margins. However, as Shelter Partnerships is a non-profit, the cost information forms a basis for the allocation of resources and to assist

Accounting Systems and Accounting
Words: 2188 Length: 8 Document Type: Journal Professional

Professional Profile of the Defense Finance and Accounting Service (DFAS): Chaos What is the Defense Finance and Accounting Service? Ensuring that the men and women who work for the United States military receive their salaries promptly is critical. The Defense Finance and Accounting Service (DFAS) serves this vital function. The DFAS was created in 1991 by the Secretary of Defense, "to standardize, consolidate, and improve accounting and financial functions throughout the Dod. The

Sign Up for Unlimited Study Help

Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.

Get Started Now