Finance and Business

Question 1

Percent Occupancy

Answer 1

average daily census / number of beds

Question 2

costs per patient day =

Answer 2

costs in month / total patient days in month

Question 3

FTEs x 1.4 =

Answer 3

number of line staff positions if you want to know how many nursing assistant positions,, for example, you can have 7 days/week

Question 4

Notes to Financial Statements

Answer 4

are included to explain the accountant’s interpretation or calculation of figures, or variation in the books due to a change in their organization, which may not be readily understood by those reviewing the financial statements

Question 5

a credit in accounting refers to

Answer 5

the right side of the journal account

Question 6

entity concept

Answer 6

a basic concept of accounting, under which the nursing facility is regarded as a whole, entirely separate from the affairs of the owners, managers, or other employees

Question 7

the income statement

Answer 7

shows whether revenues were sufficient to cover expenses, whether the facility made or lost money during the time period

Question 8

Average Daily Census (ADC) equals

Answer 8

total patient days / days in the month

Question 9

appropriate rates for resident care services

Answer 9

must reflect their true full costs

Question 10

role of the general journal

Answer 10

records transactions that do not properly fit into any of the other journals

Question 11

liabilities

Answer 11

are the obligations of the facility

Question 12

accelerated depreciation

Answer 12

this method attributes most of the depreciation expense to the first years of the asset’s life, thus enabling the facility to write it off more quickly, thereby gaining a tax advantage through earlier tax recognition of the investment

Question 13

accrual accounting approach

Answer 13

under the accrual system of accounting, revenues are recorded when they are earned and expenses when they are incurred, regardless of the time the cash transactions take place

Question 14

perpetual inventory system

Answer 14

recommended to maintain a precise count of inventory on hand, that is, an accurate count of supplies used and those remaining in the storeroom

Question 15

Cash Receipts Journal

Answer 15

records all cash received for services provided; e.g. sales refreshment machines

Question 16

Billings Journal

Answer 16

lists all bills send for services rendered

Question 17

Accounts Payable Journal (purchase journal)

Answer 17

records all purchases made that will be paid within the next few months

Question 18

Cash Disbursements Journal

Answer 18

records all payments made for services and supplies used for resident care and for all other operations of the facility

Question 19

Payroll Journal

Answer 19

summarizes all payroll checks distributed during the pay period

Question 20

General Journal

Answer 20

a record of non-repetitive entries

Question 21

the basic accounting equation

Answer 21

Assets = (Liabilities + Owner’s Equity) + (Revenues - Expenses)

Question 22

objective evidence concept

Answer 22

requires accounting records to be prepared with documentable records that are kept by the facility

Question 23

the net operating margin

Answer 23

the proportion of revenues earned to the amount of expenses used to earn those revenues

Question 24

to account for the effects of inflation or deflation on the price of inventory, the GAAP recognizes two types of inventory costing

Answer 24

last in, first out (LIFO); first in, first out (FIFO)

Question 25

cash accounting approach

Answer 25

expenses are recorded when the cash is actually dispersed and revenues are counted when the money from, for example, resident services are received by the facility

Question 26

accountant

Answer 26

uses the information compiled by the bookkeeper to generate reports on the financial standing of the facility. The bookkeepers and accountants record the financial transactions of the facility.

Question 27

five main groups of the chart of accounts

Answer 27

assets, liabilities, capital, revenues, expenses, fund account

Question 28

assets

Answer 28

things owned by the facility

Question 29

liabilities

Answer 29

things owed by the facility; or it’s obligations

Question 30

capital

Answer 30

money invested in the facility; also known as the facility’s net worth

Question 31

revenues

Answer 31

earnings from operations or other sources

Question 32

expenses

Answer 32

costs of salaries, supplies, etc. that have been used up; usually through the provision of services

Question 33

fund account

Answer 33

any funds that have been established for restricted or unrestricted use

Question 34

turnover rate in percent is =

Answer 34

(number of employees terminated X 100) / total number of full time employees

Question 35

non-current assets

Answer 35

refers to assets that will not be liquidated within the year

Question 36

Average Length of Stay

Answer 36

total patient days in the year / number of admissions in the year

Question 37

depreciation

Answer 37

is an expense associated with the use of an asset, so depreciation is included as both an expense on the income statement and a contra asset (literally against an asset) on the balance sheet

Question 38

quick ratio

Answer 38

Quick Ratio = (Cash + Accounts Receivable + Marketable Securities) / Current Liabilities

Question 39

bookkeeper

Answer 39

primarily records the daily cash transactions of the facility, keeping track of all money going out or coming in

Question 40

historic cost concept

Answer 40

another basic tenet of accounting and relates to the ongoing concern concept

Question 41

hours per patient day =

Answer 41

number of hours worked / number of patients

Question 42

straight line depreciation

Answer 42

Historical Cost / Useful Life = Annual Depreciation Expense

Question 43

working capital available

Answer 43

Current Assets - Current Liabilities

Question 44

categorization of fixed assets

Answer 44

land and improvements; buildings; fixed equipment; major moveable equipment; minor moveable equipment

Question 45

current liabilities

Answer 45

are those obligations that must be met within the next 12 months; such as bills from suppliers of foodstuffs and medical or office supplies, and short term bank loans

Question 46

the debt to equity ratio

Answer 46

a measure of the long-run liquidity of the facility or the ability of the facility to meet its long term debts

Question 47

Medicare Part D

Answer 47

benefits the facility cash flow inasmuch as some drugs are covered for the first time under Medicare Part D which drugs were previously paid for out of the preset Medicare rate being paid to the facility

Question 48

the journals

Answer 48

the first place that transactions are recorded; they are the books of original entry

Question 49

cash handling procedures

Answer 49

all cash must be handled by at least two employees, both of whom are bonded

Question 50

time period concept

Answer 50

also known as the accounting period, the time period is the interval covered by the financial reports, usually one year

Question 51

capital accounts (or net worth)

Answer 51

are recorded below the liabilities. This section is also called Owner’s Equity, Shareholder’s Equity, Fund Balance, or Retained Earnings depending on the origin of the funds that make up this section

Question 52

bookkeeping

Answer 52

a system of recording all revenues and expenses, and matching those revenues to expenses during the same time period

Question 53

Statement of Changes in Financial Positions

Answer 53

also simply called the statement of changes, this financial report shows the major transactions that occurred over the period covered by the two balance sheets

Question 54

salvage value

Answer 54

a capital asset may have some value at the end of its useful life

Question 55

the chart of accounts

Answer 55

a list of every account in the facility

Question 56

Debt / Equity =

Answer 56

Long term Debt / Total Equity

Question 57

patient census report

Answer 57

drawn up by the bookkeeper (usually for the month) by compiling the information from the Patient Census Forms

Question 58

ongoing concern concept

Answer 58

requires that the accounting reports for a facility be prepared in the same way from year to year, in order to compare accurately the reports between two or more different time periods

Question 59

current assets

Answer 59

refers to those possessions of the facility that will be, or theoretically be, turned into cash within 12 months

Question 60

the General Ledger is where

Answer 60

at the end of each month, when all adjusting entries have been made in the journal accounts, the financial information in all journals is posted (written or entered)

Question 61

historical cost of the asset

Answer 61

the cost of acquiring the asset that is depreciated over several time periods

Question 62

financial statements

Answer 62

are a summary of the nursing facility’s financial well-being within a time period

Question 63

working capital available

Answer 63

Current assets minus current liabilities equals the working capital available. This can also be considered the funds available to the facility.

Question 64

gross pay

Answer 64

calculated by multiplying hours worked by the hourly rate

Question 65

the average payment period ratio

Answer 65

Average payment period = 365 x Accounts Payable / Supplies Expense

Question 66

useful life of the asset

Answer 66

the number of years the item can be expected to be used by the facility

Question 67

depreciation

Answer 67

to account for this loss of value to capital assets in the accrual system of accounting, the cost of the asset is spread over the time period that it is used

Question 68

vertical analysis

Answer 68

converts each item on the income statement, balance sheet, or other financial report to a percentage of some total item on the same document

Question 69

FTE (full time equivalent) =

Answer 69

total number of hours worked or budgeted / 40 (an FTE is a position that works only 5 days/week)

Question 70

the balance sheet

Answer 70

records the financial position of the nursing facility at one point in time

Question 71

average collection period ratio

Answer 71

Average Collection Period = 365 x Acc. Red. / Net Operating Revenues

Question 72

a debit in accounting refers to

Answer 72

the left side of the journal account

Question 73

closing the books

Answer 73

because revenues and expenses must be measured for finite periods of time, these accounts must be brought to a sum of zero so that they can be recorded over again for a new time period. Bringing the expense and revenue accounts to zero defines closing the books

Question 74

variable costs

Answer 74

those that fluctuate directly and proportionately with changes in volume

Question 75

the cash budget

Answer 75

is prepared on the cash basis of accounting, although it is based on the revenues and expenses from the operating budget

Question 76

revenue centers

Answer 76

units of the facility, usually departments, that generate revenue usually through resident care. Revenue centers in the nursing facility will normally be nursing, possible physical therapy, occupational therapy, pharmacy, laboratory, and medical support.

Question 77

the capital budget

Answer 77

a summarization of all anticipated capital (items with a life of more than 12 months) expenditures in the budget year

Question 78

indirect costs

Answer 78

those that cannot be directly associated with a revenue-producing center, yet support the functions of the resident care centers

Question 79

pro forma financial statements

Answer 79

the preliminary financial statements based on budgeted amounts

Question 80

participatory method of budgeting

Answer 80

requires input from staff members on several levels of the organization

Question 81

fixed costs

Answer 81

do not relate to changes in volume; the cost of the DON’s salary will not change with fluctuations in the number of residents

Question 82

break even volume (in units) =

Answer 82

fixed cost / (rate - variable cost)

ex. fixed cost of $235 at rate of $75 with a variable cost of $13 would require a break even volume of 3.79 units

Question 83

to calculate the variable cost per patient in the nursing department

Answer 83

(total costs - total fixed costs) / volume units = variable costs / units
ex. $1000 total cost with $600 fixed cost and 35 patients equals a vc per patient of $11.42

Question 84

direct cards

Answer 84

those directly attributable to a revenue center or directly providing resident care

Question 85

top-down approach to budgeting

Answer 85

the administrator (or corporate) alone prepares the annual budget with little or no guidance from department heads

Question 86

five steps in the budgeting process

Answer 86

assessing the environment; programming; developing the operating budget; the cash budget; the capital budget

Question 87

total variable costs

Answer 87

total variable costs (TVC) change with volume, variable costs per unit do not. If disposable syringes are $1 each, the cost per syringe per patient will be $1, whether 100 or 150 patients receive injections using syringes purchased at one cost in one batch.

Question 88

semi-variable costs

Answer 88

do not fit neatly into either a variable or fixed category, as they vary disproportionately with volume