Ch 30 Accounts Payable and Accounting Procedues

Accounts payable (A/P)

Total amounts owed by a practice to suppliers and service providers for regular business operating expenses.

Expenditure

Acquired material, property, and labor in exchange for money.

Invoice

A document including itemization of goods, purchases, or services provided, along with charges and terms of agreement.

Required invoice fields

Company details, invoice number, initiation and due dates, client details, fees, and payment terms.

Petty cash

A small amount of stored cash (usually $25 to $75) used for minor expenses like stamps, inexpensive supplies, or small donations.

Petty cash documentation

A voucher form or expenditure list completed each time a payment is made from the petty cash fund.

Daily balancing

An integral function of financial responsibilities performed every day in a practice.

Accounting systems

The two main types: single-entry and double-entry.

Two aspects of accounting

Operating information and managerial accounting information.

Operating information

The financial data needed on a day-to-day basis for a company to conduct business.

Managerial accounting

Also known as cost accounting; the study and analysis of financial data as it applies to operational issues within a company.

Basic accounting formula

Assets − Liabilities = Net Worth

Accounts receivable (A/R) ratio

A formula that helps track how quickly outstanding accounts are paid and measures collection process effectiveness.

Collection ratios

The two types are gross collection ratio and net collection ratio.

• Collection ratios might be important to a physician’s office because they show the provider how the practice is doing with collections and whether the employees are working to their fullest capacity to enhance business

Cost ratio formula

A calculation that demonstrates the cost of a specific procedure or service.

Cost-benefit analysis

An evaluation tool that demonstrates whether the benefits received from a program outweigh its costs.

• The three steps to cost-benefit analysis are:

  • identify costs

  • identify benefits

  • compare costs and benefits

Write-offs

Charges that are deemed uncollectible by a business.

Two most common financial statements

The income statement and the balance sheet.

Income statement function

To report profit or loss; it does not balance.

Income statement categories

The two main General Ledger (GL) categories transferred here are revenue (income) and expenses.

Balance sheet function

Reports the assets, liabilities, and stockholders' equity of a business enterprise at a specific date.

Trial balance

Prepared monthly, quarterly, and annually to provide a check that debits equal credits after posting.