Finance Flashcards
Accelerated Method of Depreciation
Any method of allocating most of the depreciation expense to the early years of an asset’s estimated useful life and smaller amounts in the later years.
What is the benefit of using the Accelerated Method of Depreciation?
It enables the owner to receive tax and/or reimbursement benefits more quickly than using the straight-line method.
Accounts Payable
Amounts owed to suppliers for goods and services.
Accounting
The process of identifying, recording, and communicating information about the financial position and results of operations of a business entity, using principles designed to facilitate informed decision-making by the entity’s mangers as well as by external groups.
What is a detailed statement of the Accounting Equation?
The balance sheet.
Accounting Equation
Assets = Liabilities + Owners’ Equity (capital)
This equation states that the assets of a firm are equal to the claims of the creditors plus the claims of the owners.
Accounts Receivable
Amounts owed to the facility for services for the sale of goods.
Accumulated Depreciation
The total depreciation from the start of the life of a plant asset to any point in time.
On the balance sheet, there is a deduction for ________ __________ taken from the gross evaluation of depreciable plant and equipment to yield a net evaluation.
Accrual Basis of Accounting
A system of accounting in which revenues are recorded in the period earned and expenses are recorded in the period incurred even if cash is received or paid in a later or earlier time period.
Acid-Test Ratio or Quick Ratio
Cash and other current assets that can be converted to cash right away (such as marketable securities and current receivables) divided by current liabilities. A measure of the ability of a firm to pay its current liabilities in the very short term.
What are examples of Adjusting Entries?
Entries for depreciation expense and unused portions of prepaid expenses.
Adjusting Entries
Entries made at the end of an accounting period to record certain transactions or other accounting events that have not been recorded or have been improperly recorded during the accounting period.
Aging of Accounts Receivable
Summarizing unpaid balances in terms of age groups, such as: currently due, 1-30 days past due, 31-60 days past due, each of the remaining 30-day periods through 151-180 days past due, and finally past due more than 180 days.
How can the classification of Aging of Accounts Receivable be broken down into further classification outside of days?
By the type of debtor. Aging receivables is a step in the collections effort, in reporting on the balance sheet a deduction from accounts receivable for estimated bad debt, and in making write-off decisions.
What is an Allowable Charge?
The maximum fee that a third party will us in reimbursing or paying a provider for a service rendered.
What is an Allowable Cost?
Costs that are reimbursable under a third-party payment formula.
What is Amortization of Debt?
The periodic reduction of a debt by regular payments applied to both principal and interest over a scheduled period.
What are Ancillary Charges?
Extra charges for supplies and services, e.g., drugs and lab tests, that are not included in the per diem rate.
What are penalties of violating the Anti-Kickback Law?
Subject to criminal penalties or exclusion from participation in the MCR & MCD programs, or both.
Anti-Kickback Law
The MCR and MCD ____-______ Law penalizes anyone who knowingly and willfully solicits, receives, offers, or pays remuneration in each or in kind to induce, or in return for:
A) Referring an individual to a person for the furnishing, or arranging for the furnishing, of an item or service to be paid for by the MCR & MCD program.
B) Arranging or recommending the purchase, lease, or order of goods or services to be paid for under MCR or MCD.
Assets
Resources owned by a business that are measured in monetary terms. On a balance sheet, _____ are generally classified into current and noncurrent portions.
Current Assets
Are cash, accounts receivable, supply inventories, and prepaid expenses.
Noncurrent Assets
Include Property, Plant and Equipment (PP&E) (also referred to as fixed assets, capital assets, or plant assets) which are assets having an estimated life in excess of one year and not intended for sale in the ordinary course of operations.
Assisted Living Facility
(ALF)
Term applied to broad array of residential options for frail seniors who need assistance with one or more ADLs, such as dressing or bathing, but do not require continuous skilled nursing care.
Generally emphasize a homelike environment offering a maximum amount of independence and privacy.
Audit
Examination of accounting systems, controls, and records to ascertain their conformity to legal and professional standards and their adequacy in protecting against loss of assets by fraud and waste.
Bad Debt
An account receivable determined to be uncollectable.
Balance Sheet or Statement of Financial Position
A report summarizing a firm’s assets, liabilities and owners’ equity at a specific date.
Bank Statement
Statement sent by a bank to a bank account holder showing beginning and ending balances, and all transactions in the account for a month.
Bank Statement Reconciliation
Process of explaining and correcting any discrepancies between a bank statement balance and the depositors record of the cash balance.
Benefit Period
Period of consecutive days during which covered services furnished to a patient, up to certain specified maximum amounts, may be paid for by an insurance plan.
Each insurance has its own definition of ______ ________.
Medicare Benefit Period
Begins with the first day a beneficiary is a hospital inpatient. It ends when 60 consecutive days have elapsed during which the patient was neither an inpatient of a hospital nor of a SNF.
A beneficiary is an inpatient in a SNF only if the beneficiary receives what MCR considers a skilled level of care during the stay that earns reimbursement under MCR & MCD.
What is the MCR benefit?
Pays for up to 100 days of SNF care per benefit period. Days 1-20 are covered 100% and for days 21-100, there is an out-of-pocket cost to the resident. (coinsurance)
Bidding
The process of requesting from vendors a response (___ or offer) to provide goods or services according to written specifications. The _______ may be closed (directed to select bidders) or open (to all bidders). The ____ may be negotiated before the contract is final.
Bonds
Interest-bearing notes, usually in $1,000 or $5,000 amounts, in which the issuer (borrower) promises to repay the bondholder (lender) the principal and interest of a loan according to a schedule.
What is the Break-Even Point?
The point at which total revenues for a firm or a program are equal to the total expenses incurred. This may be illustrated on a graph where revenues (and expenses) are plotted on the vertical axis while resident-days are plotted on the horizontal axis.
Bookkeeping
The clerical process of recording the financial transactions of an organization.
Cash Basis of Accounting
A system of accounting in which revenues are recorded when cash is received, and expenses are recorded when cash is paid. (Contrast with Accrual Basis of accounting)
How are residents’ classified in Case-Mix-Payment Systems?
Assessments are conducted to classify covered residents into defined groups based primarily on functional disability scores, but certain diagnoses, service needs, and behavioral problems may also be considered.
Case-Mix-Based Payment Systems
Payment systems used by MCR and many state MCD programs under which the per diem rates for each NF are determined in part by some measure of the acuity, and thus the likely resource consumption, of each covered resident in the facility.
Is the per diem rate different for each group in a Case-Mix-Payment System?
Yes, with higher rates paid for residents needing and receiving more services.
Cash Flow
Cash inflows from collections of revenues and other sources minus cash outflows for payments of expenses and liabilities. A cash budget or ____ ____ forecast projects these amounts, whereas a cash-flow report shows actual experience.
Chart of Accounts
A list of names and numbers of all the accounts used in a business. There typically are accounts for various subcategories of each of the following: assets, liabilities, owner’s equity, revenues, and expenses.
Contractual Discount
The difference b/w the rate the facility normally charges for services to its self-pay residents, and the lower rate that the facility has agreed to receive as reimbursement from MCR, MCD, or other third-party payers.
For external reporting purposes, how are revenues recorded?
As the amounts actually to be collected.
For internal reporting purposes, how are revenues to be recorded?
Management may record such contractual discounts as deductions from operating revenues on the income statement and accounts receivable on the balance sheet so that the amount of discounts given to each payer class is known.
Controller or Comptroller
The chief accountant of a firm.
Corporate Integrity Assessment
An agreement negotiated by the Office of Inspector General (OIG) with a healthcare provider as part of the settlement of a federal healthcare program investigation arising under the FalseClaimsAct. To avoid worse penalties, a company may agree to such compliance activities as: hire a compliance officer or appoint a compliance committee, develop written standards and policies, implement an employee training program, and/or return an independent review organization to review claims submitted to federal health care programs.
Cost Center
An organizational unit charged with responsibility for controlling its own costs, and so its costs (for salaries, supplies, etc.) are separately accumulated in the accounts. A c
____ ______ may more may not be a revenue center, i.e., a unit providing direct services to patients for which they are charged.
Current Ratio
Current assets divided by current liabilities.
A measure of a firm’s ability to pay current debts. A _______ _____ below 1.00 (or 1:1) may indicate problems in meeting current liabilities as they become due.
Days of Cash
The number of days during which expenses could be paid using the cash on hand
Formula:
Cash + Marketable Securities
___________________________________
(Total operating expenses minus depreciation)/365
Days in Resident Accounts Receivable
All net resident accounts receivable divided by average daily net resident revenue.
Formula:
Net resident accounts receivable from all sources
———————————————————
Net patient revenue/365
Debt Service Coverage Ratio
Projected annual cash flow (i.e., excess of cash receipts over case expenses) divided by required annual debt payments.
Measure used by potential leaders of the credit-worthiness of an entity.
Depreciation
The systematic allocation of the cost of a fixed asset to expense over its useful life.
Dividend
A distribution of earnings to shareholders of a corporation.
Double-Entry Accounting
The system of recording transactions that requires each transaction to be recorded at least twice: as an addition or subtraction to one account (a debit), and as an addition or subtraction to at least one other account ( a credit). This system provides a logical way to record much information.
At the end of a period, after all adjusting entries are made, the sum of the debits should equal the sum of the credits. When a trial balance indicates that these two totals are equal, the “books balance” and financial statements can be prepared. Failure to find this equality is an indicator that one or more recording errors were made.
Double-Entry Rules
Increases in asset accounts and expense accounts are recorded as debits; decreases are credits. Increases in liability, revenue, and owners’ equity accounts are credits; decreases are debits.
EBITDAR
Earnings before interest, taxes, depreciation, amortization, and rent. This shows cash available to pay interest, rent, and taxes after paying operational costs. It is a measure used by potential lenders of the credit-worthiness of an entity.
Equity
The excess of a firm’s assets over its liabilities equals the owners’ _____
False Claims Act
Federal law that provides for civil or criminal penalties for individuals and entities for submitting a false claim, or causing a false claim to be submitted, to a federal health care program. False or fraudulent claims include claims for items not provided or not provided as claimed, claims for services that are not medically necessary, and claims when there has been a failure of care. Many states have a parallel law that applies to the state MCD and other state health care programs.
First In, First Out (FIFO)
(Inventory)
Inventory usage ideal for using the oldest supplies first. New supplies are shelved based on the use-by or expiration date so that the oldest products are stored in front and used first.
First In, First Out (FIFO0
(Finance)
Inventory costing method for balance sheet purposes that assumes that the first goods purchased are the first goods used, so the ending inventory should be valued at the cost of the most recent goods purchased.
Last In, Last Out
Assumes the opposite of FIFO and values ending inventory at the cost of the earliest goods purchased.
Fraud
Deliberate deceit by providers or consumers in obtaining payment for services that were not actually delivered or received, or in claiming program eligibility.
To be distinguished from abuse, which refers to improper or excessive use of program benefits, resources, or services by either providers or consumers. Abuse is not necessarily intentional or illegal.
Funded Depreciation
The setting aside of a portion of retained earnings (equal to depreciated expense) in a separate account designated to be used only for the purchase of replacement capital assets.
General Ledger
Financial record, consisting of a collection of accounts, that summarizes all the entries in each of the journals for an accounting period, for the purpose of keeping a continuous record of account balances and arriving at a trial balance.
Health Maintenance Organization
(HMO)
An organization that has management responsibility for providing comprehensive health care services on a prepayment basis to voluntarily enrolled persons within a designated population.
Historical Cost or Acquisition Cost
The cost of acquiring a depreciable asset, which includes not only the purchase price but also the cost of taxes, shipping, assembly, and installation.
Income
An increase in owner’s equity resulting from services rendered or goods provided.
Income Statement or Statement of Revenue & Expenses
A report which lists in summary form revenues and expenses for a certain time period, such as a month or a year.
A profit results for an excess of revenues over expenses for the period, and loss occurs when expenses exceed revenues.
So the _____ __________ also shows profit or loss, and therefore also called the profit-and-loss (P & L Statement)
Inventory
The goods and materials on hand which are to be used in producing services or held for resale.
Independent Contractors
Category of persons providing services who are not considered the Internal Revenue Service (IRS) as employees.
Employers, generally, do not have to withhold federal income tax or FICA taxes on payments to ___________ ___________.
Journal
Book of original entry, the first place in which transactions are formally recorded. Entries are in chronological order.
What is the general rule for Independent Contractors?
“Follow an independent trade, business, or profession in which they offer their services to the general public.” and those who pay for their services “ have the right to control or direct only the result of the work and not the means and methods of accomplishing the result.”
What form must be filed if an employer pays an independent contractor $600 or more during a year?
Form 1099-MISC
Invoice
Document prepared by a seller for a buyer that describes goods sold or services rendered and the term for payment.
A separate journal is generally maintained for the following categories of transactions:
Cash receipts, cash payments, billings, accounts payable, and payroll
What is a General Journal used for?
Entries that do not properly belong in any of the other journals, and for adjusting entries. Adjusting entries include entries for depreciation, prepaid expenses, and inventory usage.
Kickback
A portion of a fee, salary, or other payment that is given to a third party for having assisted–or refrained from preventing–the payment in the first place. Most types of _________ are illegal.
Lease
A contract requiring the lessee (user) to make periodic payments (rentals) for a specified period of time to the lessor (owner) for the use of an asset.
Operating Lease
Generally for a short term or limited number of years.
Expenses are listed on the income statement.
Capital Lease
A long-term lease agreement extending generally for the entire life of equipment or property leased.
Should be reported as assets and are long-term liabilities on the balance sheet.
The asset (capital lease) is amortized or depreciated based on its useful life.
Liabilities
Debs owed by a firm to persons or firms other than its owners. On a balance sheet, ___________ are classified as current if they are due w/in one year from the balance sheet date, and long-term (or noncurrent) if they are due more than one year from the balance sheet due.
Line of Credit
Form of financing in which a financial institution commits itself to make a loan to a company up to a specified maximum amount. The company may choose to use its ____ __ ______, subject to the terms of credit, when and if the need arises.
List of Excluded Inividuals/Entities
The online data base maintained by OIG provides information regarding over 15,000 individuals and entities that are excluded from participation in MCR, MCD, and other federal health care programs.
Check potential employees and business to make sure they are not on the list.
Loan-to-Value Percentage
The maximum loan amount based on a percentage of the borrowing facility’s appraised value.
General Services Administration
(GSA)
List of parties excluded from federal procurement and non-procurement programs.
Managed Care Organization
(MCO)
Entity that integrates the financing and delivery of health care to covered individuals by means of arrangements with a limited number of selected providers. It provides financial incentives for membership, quality assurance programs.
Medicaid Managed Care Organization
(MCO)
An entity that has entered into a risk contract with a state MCD agency to provide a specified package of benefits to MCD enrollees in exchange for a monthly capitation payment on behalf of each enrollee. These plans may include or carve out acute care services.
Some MCO’s coordinate MCR & MCD services for dually eligible beneficiaries.
Mortgage
A written promise giving a creditor an interest in the debtor’s property as security (collateral) for debt.
Note
A written promise to pay a specific sum with or without interest at a fixed future date.
Occupancy Rate
The ratio of actual # of resident days to the total possible resident days, usually expressed as a percentage.
Alternatively expressed as the ratio of occupied beds to available licensed beds.
Example: 100-bed facility with 80 beds full is 80/100= 80%.
Office of Inspector General
(OIG)
Office in the U.S. Department of Health and Human Services charged with identifying and eliminating fraud, abuse and waste in the MCR, MCD, and other DHHS programs.
Carries out this mission through a nationwide program of audits, inspections, and investigations, and through issuance of Special Fraud Alerts
Payback Period
A simple device for comparing investment proposals. It is the time in years for the net cash inflow from a capital investment to be equal to its cost, that is, for the item to “pay for itself.”
Formula:
Total Investment
___________________
Annual savings or increased net cash flow
Opportunity Cost
The value of the benefits sacrificed when money or other asset is used one way rather than in an alternative way. It is the net benefits that might have been obtained had the money been spent on the next best use.
Example: If $1,000 is spent for activity program supplies, the opportunity cost is the cost of not having the benefits of $1,000 worth of food or landscaping services, or of not earning the interest had the money simply been left in the bank.
Pledging of Accounts Receivable
Use of receivables as security or collateral for a loan. This is done “with recourse,” the borrower remains responsible for collecting the receivables but promises to use the proceeds for repaying the debt.
In contrast, factoring of receivables is the sale of receivables as a means of short-term financing. When this is done “without recourse,” the seller transfers not only the receivables but also the risk of default.
Prepaid Expense
Expenses paid in advance for several months, e.g., building rental payments, journal subscriptions, and insurance premiums. These expenses are allocated to the months by adjustment entries.
Posting
A step in the accounting process when journal entries are transferred (posted) to accounts in the general ledger in order to summarize information such as cash on hand.
Prospective Rate-Setting
Practice by MCR and most state MCD programs of using predetermined rates to reimburse NFs without adjusting payment to cover actual costs. The states use a wide variety of methodologies to develop these rates. If the provider can keep costs below the formula-determined rate, a profit can be made. If the provider’s costs exceed the rate, a loss is incurred.
Purchase Order
Document from a prospective purchaser requesting a seller to provide certain quantities of described goods or services at a given price, with payment to be made later.
Reserve
Funds set aside to meet some future obligation.
Retained Earnings
Earned Surplus
Undistributed Profits
The income left to a company after taxes and dividends have been paid that are a major source of funds for the company’s expansion.
Restricted Funds
Funds established to accounts for assets with uses limited by the requirements of donors or grantees. For example, a fund may be restricted to plant replacement. If the donor has specified that the principal must be maintained perpetually, and only the investment income it generates may be expended, the principal is accounted for as an endowment fund.
Return to Equity
(ROE)
A means of assessing a company’s profitability. It is calculated by dividing the firm’s annual net income by total shareholders’ equity.
Revenues
Income earned from carrying out the activities of a firm. Revenues of healthcare institutions are typically reported in terms of these three components:
What are the three components of healthcare revenues?
A) Patient Service Revenues: may be divided into the “room, board, and general nursing services” covered by rates billed to all patients; and ancillary services such as PT or pharmacy, which re billed to only some patients.
B) Other operating revenues: are revenues earned incidental to the main purpose of rendering patient care, such as revenues from the employee cafeteria, beauty shop, and other concessions.
C) Non-operating revenues: may include separate line items for interest and other investment income, unrestricted gift income, or gains (or losses) on sales of property
RUG Creep
A form of upcoding under the MCR PPS for SNFs which occurs when the SNF falsely or fraudulently completes the MDS and this results in incorrect assignment of a resident to a higher-paying RUG category.
Safe Harbors
Federal regulations that define practices that, if fully followed, will not be considered violations of the federal anti-kickback. There are regs, for example, that describe conditions under which payments may be made to operators of referral services.
Self-insurance
An alternative to purchased insurance. An entity assumes its own expenses relative to a specific risk of loss by periodically setting aside an actuarially determined amount of money, which may be held by a trustee.
Special Fraud Alerts
Statements issued by the OIG to the general health care provider community addressing national trends in health care fraud and providing guidance relative to violations of the anti-kickback statute and other federal laws.
Stark Act
Common name for a set of laws, including the Ethics in Patient Referrals Act of 1989, that prohibits the practice of “self-referral” by physicians, that is, referrals of MCR & MCD patients to a provider of services paid for by government programs, when the physician has a direct or indirect ownership or investment interest in the provider.
Statement of Cash Flows
Financial statements that displays how the cash balance has changed during a fiscal period. Cash increases and decreases are reported in three categories of activities:
Operating
Investing
Financing
This info can be useful in assessing the entity’s ability to generate positive future net cash flows, meet its financial obligations, and pay dividends.
Statement of Changes in Owners’ Equity or Funds Balance
A financial statement that reflects the beginning owner’s equity, the profit or loss of the current period, and the ending owner’s equity as of the Balance Sheet date.
Not for Profit Use: Funds Balance
Straight Line Method of Depreciation
A depreciation method that allocates equal amounts of depreciation expense to each full period of the asset’s life:
Annual depreciation expense=historical cost
______________________________________________
Years of estimated useful life
Subacute Care
As defined by the American Health Care Association, this is: “a comprehensive inpatient program designed for the individual who:
(1) has had an acute event as result of an illness, injury, or exacerbation of a disease process
(2) has a determined course of treatment
(3) does not require intensive diagnostic and/or invasive procedures.
Includes programs for postoperative recovery, extensive wound care, ventilator support, brain injury care, rehab, complex medical care, and respiratory or pulmonary management.
Supplies
Items consumed in the normal course of business operations (bandages or soap). Projected supply expenses are included in the operating budget, not the capital budget.
Swapping
Practice of a supplier giving a NF excessive discounts on MCR part A items and services in return for the ability to service and bill NF residents with Part B coverage. This may be considered an illegal inducement.
Third Party Payer
Commercial insurer or other private or public entity (such as MCR & MCD) which pays for all or part of the charges for a resident
Upcoding
The selection, when a claim is submitted to a third-party payer, of a billing code that is not the most appropriate descriptor of a service or condition and that may result in an overpayment to the provider.
________ creep is a type of ________
Useful Life or Service Life
The period of time a fixed asset (piece of equipment or vehicle) can be used by its owner in the production or sale of other assets or services. In order to allocate depreciation over time, total service life must be estimated when a fixed asset is purchased.
Variance Analysis
A control technique that evaluates significant differences between budgeted and actual revenues and expenses.
W-2
Forms that the Internal Revenue Service (IRS) requires an employer to give each employee by January 31st that shows the employee’s earning and income tax and FICA tax deductions for the past year.
W-4
Form that the IRS requires an employer to allow each employee to submit on which the employee indicates marital status and number of withholding allowances claimed. This information must be used by the employer in determining amount of income tax to withhold.
Working Capital
The excess of current assets over current liabilities. _______ _______ management is the effort to increase this desirable excess by increasing current assets in various ways and decreasing current liabilities in various ways.
Write-Off
Removing an uncollectible account from the accounts receivable. Bad debts expense is increased and the asset, accounts receivable, is decreased when the account receivable is written off.
“Assets are always equal to the sum of liabilities plus owners’ equity” is the basic concept in the organization of the?
Balance Sheet
The financial success or failure of a nursing facility is usually measured by it?
Return on equity
The importance of matching revenue with the expenses incurred in generating those revenues is the reason for recording what?
Depreciation
Using the straight-line method, what would be the annual depreciation expense for a piece of equipment having a cost of $6,000, a manufacturer’s warranty for 2 years, and an estimated useful life of 6 years?
$1,000
Which of the following is a current asset?
1) Gross earning
2) Accounts receivable
3) Company car
4) Retained earnings
Accounts receivable
A generally accepted accounting principle (GAAP) would be violated if a company?
Used in its balance sheet an optimistic estimate of the current market value of its building
The Medicare Benefit period ends when a beneficiary?
Has had 60 straight days with neither any hospital stays nor SNF days
Which of the following statements is NOT true regarding the MCR Prospective Payment System for SNFs?
1) Facilities located in different urban areas receive different rates that reflect differences in area wage rates
2) The system is case-mixed-based
3) Facilities must submit bills to be reimbursed
4) There are separate prospective rates for capital-related costs
4
Completion of the Medicare cost report requires carrying out what tasks?
-Cost finding
-Apportioning the costs for caring for MCR residents from the costs for caring for non-MCR residents
-Determination of allowable costs
The term for unintentional improper or excessive use of benefits of a health insurance program is?
Abuse
True or false? A cash budget may provide advance warning of months when cash outlays fall short of cash receipts?
True
If the facility’s occupancy increases from 94% to 98%, the fixed cost per resident?
Decreases slightly
A nursing home is considering the purchase of a new dish-washing machine that costs $6,000 and has a useful life of 10 years (with no salvage value). It is estimated that the machine will reduce annual operating costs by $800 over each of the next ten years. What is the payback period?
7.5 years
What is the equation for a payback period?
Payback Period=
Initial Investment/Annual Cash Savings
A W-4 form shows each employee’s?
Number of claimed exemptions for withholding purposes
To obtain maximum reimbursement under the MCR Prospective Payment System, a skilled nursing facility should do?
-Record on the MDS all the information about the resident that can determine assignment to a RUG
-Track costs by RUG categories
-Collect MDS information more frequently for Part A-covered residents than for other residents
What is an illegal practice for a MCD-certified facility?
Requiring the payment of the facility’s private-pay rate for a certain number of months as a condition for admission
Autocratic budgeting process?
The administrator (or owner/corporate) prepares the annual budget with little or no input from department heads
Participatory budgeting process?
Department heads prepare departmental staffing plans and expense budgets within guidelines provided by management. Administrator reviews and consults as necessary
Operating Budget includes?
All planned revenues by source and all anticipated expenses by “natural classification” such as salaries and wages, supplies, utilities, taxes, interest, and depreciation
Capital budget includes?
A plan that shows major capital expenditures for new equipment or buildings for the replacement and/or modernization of existing equipment and facilities.
-Items individually costing more than a specified amount (typically $500 to $2,500) and having a useful life of more than one year
Cash budget includes?
cash receipts and cash disbursements for each month or shorter period in the budget year. Cash is budgeted to ensure that cash will be available to pay current liabilities as they become due to maintain a satisfactory credit record.
Sometimes called a cash flow forecast.
It is important to determine causes for both favorable and unfavorable variances. Consideration should be given to whether a given variance is due to one or more of the following:
-Change in occupancy
-Change in case mix, i.e., types of residents admitted, resulting in differences in types of services provided or differences in intensity, i.e., number of services provided to each resident
-Change in rates received or prices paid
-Differences in efficiency or productivity, i.e., grater or lesser use of inputs for each resident-day or other unit of output.
The inputs can be hours of staff time, items of supply, or some measure of indirect or overhead costs
What is cost finding?
The process of allocating all direct and indirect costs to cost centers, is essential to determining the true costs of services.
What are direct costs?
Costs traceable to and incurred for the sole benefit of a specific revenue-producing service or department.
What are indirect costs?
Incurred for the joint benefit of more than one department. Related to support of overhead departments–such as housekeeping, laundry, maintenance, and general administration–that provide services to the revenue-generating departments.
What is a break-even analysis?
To compute how many service-units (resident days) a revenue center must produce in order to break even (reach the point when total revenues are equal to total costs), one needs revenue per unit, and the total fixed costs.
What are the basic management tasks?
Planning, organizing, staffing, directing, coordinating, reporting, budgeting
