Ch.4_Balance Sheet Cash Flows_Inst

Ch.4_Balance Sheet Cash Flows_Inst - MODULE 1: FINANCIAL...

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1 MODULE 1: FINANCIAL ACCOUNTING Gapenski chapter 4
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2 Module 1 learning objectives Define accounting terms and correctly use accounting vocabulary to describe economic activity Read and interpret a company’s financial statements Identify the relationships among the financial statements Determine the effects of misstatements on financial statement balances Use the accounting equation to describe an organization’s financial position Analyze business activity with accounting concepts and principles and make recommendations based on analysis
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3 Gapenski Chapter 4: The Balance Sheet & Statement of Cash Flows Assets Liabilities Equity Statement of Cash Flows
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4 Balance sheet basics Information about assets & how assets are financed Assets Current assets Long-term assets Total assets Liabilities and Equity Current liabilities Long-term liabilities Equity Total liabilities  and  equity
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5 Balance sheet basics The balance sheet presents a snapshot of a business’s financial position at a moment in time
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6 Balance sheet basics The basic format of the balance sheet follows the accounting identity : Assets = Liabilities + Equity Basis for financial accounting – must always hold true Assets Liabilities + Equity
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7 Assets Possess (e.g., cash) or create (e.g., buildings and equipment) economic benefit to the business Listed on the balance sheet in order of liquidity Divided into current and non-current
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8 Current assets Cash or expected to be converted into cash within one year: Cash Marketable securities Net patient accounts receivable Inventories Prepaid expenses
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9 Cash represents actual cash on hand and money held in commercial checking accounts Marketable securities (MS) - short-term investments in highly liquid, typically low- risk, securities Cash and marketable securities
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10 Represents revenues owed to the business but not yet collected Net patient accounts receivable is net of: Charity care and discounts - not reflected in financial statements An allowance for doubtful accounts shown on balance sheet or in footnotes Net patient accounts receivable
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11 Net patient accounts receivable Recall how we recorded patient revenues Gross patient revenues (charges) - Discounts & Contractual Allowances - Charity (indigent care) ----------------------------------------------------------- = Net patient service revenue on income statement
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12 Net patient accounts receivable Net patient service revenue on the balance sheet Cash Accounts Receivable If the revenue is net of charity & discounts, the amount owed to the firm must also be net of charity & discounts.
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13 Recall that bad debt is shown as an expense on the income statement Bad debt reflects an estimate of accounts receivable that the firm doesn’t expect to collect So, accounts receivable should be reduced by this amount
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This note was uploaded on 02/24/2010 for the course HPM 340 taught by Professor Reiter during the Spring '10 term at UNC.

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Ch.4_Balance Sheet Cash Flows_Inst - MODULE 1: FINANCIAL...

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