Ch.3_Income Statement

Ch.3_Income Statement - MODULE 1: FINANCIAL ACCOUNTING...

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1 MODULE 1: FINANCIAL ACCOUNTING Gapenski chapter 3
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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 3: The Income Statement Revenues Expenses Net income Net income versus cash flow
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4 Income Statement Basics Provides information about a business’s operations and economic profitability Net income or loss reflects a change in equity for the accounting period Often called by other names: Statement of operations Statement of activities Statement of revenues and expenses
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5 Income Statement Basics The income statement reports the results of operations over some period of time , such as a year
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6 Revenues Economic inflows to the organization Not (necessarily) cash accrual accounting revenues represent amounts earned during the year Most likely accounting effects Increase (debit) assets (cash or accounts receivable) Increase (credit) revenue (increase equity)
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7 Net patient service revenue Net patient services revenue reflects income from patient care services. It is net of: Discounts / contractual allowances Charity care NOT net of bad debts – bad debts are recorded as an expense In a capitated environment, patient revenues may be called premium revenue
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8 In-class exercise Memorial Hospital has the following account balances Gross patient service revenue $15,000 Other revenue 3,000 Bad debt expense 2,500 Charity/indigent care 3,000 Interest income 7,000 CALCULATE NET PATIENT SERVICE REVENUE
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9 Other revenue Represents revenues from sources besides patient care, including: Interest earned on financial investments Contributions Rental income Tuition income (e.g., for nursing school) Gift shop Cafeteria
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10 Revenues may be further classified Total Revenue (Patient + Other) Operating Revenue Non-Operating Revenue
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11 Operating revenue Revenue related to the primary operations of the business (e.g., the provision of health care) Patient service revenue Premium revenue Some other revenue (e.g., parking garage, cafeteria, gift shop)
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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.3_Income Statement - MODULE 1: FINANCIAL ACCOUNTING...

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