Health Services Management
HSM 340
7/17/2011
Assignment Week 2
1. Accrual basis of accounting is maintaining the business transactions at the moment it occurs. When the business performs a service, a sale, or earns an expense the accountant records the transactions. It also records if the transaction receives or pays no cash.
AccountingCoach.com (2011) website states the following: 1. Revenues are reported on the income statement when they are earned— which often occurs before the cash is received from the customers. 2. Expenses are reported on the income statement in the period when they occur or when they expire—which is often in a period different from when the payment is made. Accrual basis gives a visual of the financial transactions that take place at the precise moment they occur. It can be somewhat a difficulty to figure out when a sale or purchase has occurred because of the date the job was completed.
Cash basis of accounting is maintaining only cash transaction, cash receipts, and cash payments. Cash receipts are labeled as revenues and cash payments are considered as expenses. According to AccountingCoach.com (2011), “Revenues are reported on the income statement in the period in which the cash is received from customers. Expenses are reported on the income statement when the cash is paid out” (p.1). Cash basis is very specific because it records only cash transactions and it is usually used for small businesses.
2. Statement of operations for Currie Hospital for December 2008.
Currie Hospital
Statement of Operations Dec. 2008
Revenues
Debit
Credit
Net patient service revenue
$840,000
Transfer to parent corporation
$10,000
Net assets released from temporarily-restricted accounts for operations
$120,000
TOTAL REVENUES
$970,000
Expenses
Administrative expenses
$80,000
Depreciation expenses
$50,000
Interest expenses
$12,000
Labor expenses
7/17/2011
Assignment Week 2
1. Accrual basis of accounting is maintaining the business transactions at the moment it occurs. When the business performs a service, a sale, or earns an expense the accountant records the transactions. It also records if the transaction receives or pays no cash.
AccountingCoach.com (2011) website states the following: 1. Revenues are reported on the income statement when they are earned— which often occurs before the cash is received from the customers. 2. Expenses are reported on the income statement in the period when they occur or when they expire—which is often in a period different from when the payment is made. Accrual basis gives a visual of the financial transactions that take place at the precise moment they occur. It can be somewhat a difficulty to figure out when a sale or purchase has occurred because of the date the job was completed.
Cash basis of accounting is maintaining only cash transaction, cash receipts, and cash payments. Cash receipts are labeled as revenues and cash payments are considered as expenses. According to AccountingCoach.com (2011), “Revenues are reported on the income statement in the period in which the cash is received from customers. Expenses are reported on the income statement when the cash is paid out” (p.1). Cash basis is very specific because it records only cash transactions and it is usually used for small businesses.
2. Statement of operations for Currie Hospital for December 2008.
Currie Hospital
Statement of Operations Dec. 2008
Revenues
Debit
Credit
Net patient service revenue
$840,000
Transfer to parent corporation
$10,000
Net assets released from temporarily-restricted accounts for operations
$120,000
TOTAL REVENUES
$970,000
Expenses
Administrative expenses
$80,000
Depreciation expenses
$50,000
Interest expenses
$12,000
Labor expenses