School of Health Science HA240: Medical Office Accounting Week 3 Seminar

School of Health Science Week 3 Seminar In this week’s seminar we will cover: The information in Chapters 6 and 7 Recording Financial Information Closer Look at Financial Statements Looking forward to Unit 4 Conclusion

School of Health Science Chapter 6: Recording Financial Information The Double Entry System The Double Entry System The double entry system is considered the “Golden Rule” of accounting The double entry system is considered the “Golden Rule” of accounting The journal is a common historical device that accountants have chosen to monitor an organization’s financial activity The journal is a common historical device that accountants have chosen to monitor an organization’s financial activity To understand the Double Entry System, you must keep in mind the basic equation of accounting that we discussed in Unit 1. To understand the Double Entry System, you must keep in mind the basic equation of accounting that we discussed in Unit 1. Assets (A) = Liabilities (L) + Net Assets (NA) Assets (A) = Liabilities (L) + Net Assets (NA) Any event having a financial impact on the organization directly impacts this equation as well, so the equation is kept in balance Any event having a financial impact on the organization directly impacts this equation as well, so the equation is kept in balance

School of Health Science Chapter 6: Recording Financial Information Understanding Debits and Cred its Know that debits increases anything on the left side of the accounting equation and credits increase anything on the right side of the accounting equation Think about debits increasing liabilities and credits increasing assets Key Concepts to Remember Double Entry Accounting Journal Debits Credits Timing for Recording Transactions Adjusting Entries You can find the information relating to the Key Concepts on page 46 of the text Test yourself at: s.htm. s.htm

School of Health Science Chapter 7: A Closer Look at Financial Statements Financial statements are used to present the organization’s financial position and results of operations to interested users of financial information Financial statements are used to present the organization’s financial position and results of operations to interested users of financial information Financial statements contain periodic summaries of all financial transactions Financial statements contain periodic summaries of all financial transactions Typically completed monthly, quarterly, and/or annually) Typically completed monthly, quarterly, and/or annually) Must be concise Must be concise

School of Health Science Chapter 7: A Closer Look at Financial Statements Every account affected by a journal entry is individually accounted for in a ledger The ledger keeps a running balance for each account. For example, if a journal entry is made that affects cash, the cash account in the ledger is adjusted accordingly Each journal entry changes at least two ledger accounts to keep the accounting equation in balance

School of Health Science Chapter 7: A Closer Look at Financial Statements What is a Journal? What is a Ledger? Journal is a listing of individual transactions. Ledger tracks the running balance of an account. Begins with the ending balance from the previous period Begins with the ending balance from the previous period Adds each current period journal entry Adds each current period journal entry The operating statement is the comparison of Revenues and Expenses and is taken from ending balance of each revenue and expense ledger account

School of Health Science Looking Forward to Unit 4 In Unit 4 we will look at the Management of Practice Finances Practice finance management is important because it directly impacts the efficient flow of any health care organization You will learn the four kinds of information that the financial records of any business should show at all times You will be able to distinguish between accounts payable and accounts receivable You should be able to list and explain the three most common bookkeeping systems found in physicians’ office today You will learn the importance of a trail balance. Finally, you will be able to describe how to maintain a petty cash fund.

School of Health Science Conclusion Remember the importance of the “Golden Rule” of accounting Understand the differences in financial reporting, particularly with journals and ledgers Make sure you can produce and analyze accurate financial statements for your organization