Financial Flashcards
Accrual Accounting
Recognized revenues as earned and expenses are incurred, which disregards when the actual cash transaction occurs.
Income and expenses are measured when the transactions occur.
Define imprest
The amount of cash available to make change for transaction during the coming hours of business activity. Each drawer consistently starting with a given amount of cash for change.
Profit center report
Reports that track income from related service codes and expenses related to producing that income, arriving at the profit for those practice areas.
Managerial accounting
Includes both historical and estimated data that management can use to conduct daily operations, planning future acquisitions, and developing business strategies.
Commodity
An item that is considered interchangeable and whose price is a reflection of supply and demand.
Intangible
Non physical asset that provide an organization an exclusive or preferred position in the market place. Examples: copy rights, patents, trademarks, goodwill, organizational costs.
Variable expenses
Those that will change and be directly influenced by volume. Presents a large portion of total expenses. Inventory/Product costs are the 2nd highest expense after personnel. Lower than fixed expenses.
FTE
Full Time Equivalent
Ratio of total number of paid hours during a period divided by the number of working hours in that period. M-F
Fixed expenses
Those that remain stable/unchanged, regardless of volume.
Example: Rent, professional liability insurance PLIT
FUTA
Federal unemployment tax act
Payroll or employment tax paid only by an employer. Not deducted from employee.
ERISA
Employment retirement income security act
Define cash basis accounting
Income is measured when cash is received and expenses are measured with cash is spent.
Production report
Report produced by your practice management software that shows income by service code.
Revenue per FTE Veterinarian
Practice Revenue divided by FTE vets
Section 125 cafeteria plan
Allows employees to pay certain expenses before taxes are deducted from paychecks; saving on federal and state taxes.
Goodwill
An intangible asset listed on an organization’s balance sheet. Represents the value of an organizations reputable brand name, positive customer relations, patients and other non-physical assets.
IRR
Internal Rate of Return
The rate of a discount on an investment that equates the present value of the investments. Cash outflows with the present value of the investments cash inflows.
Embezzlement
The fraudulent appropriation of funds or property entrusted to your care, but actually owned by someone else.
Define horizontal level of income
Adding products of services, satellite facilities, etc.
Level of assurance: Define audit
Highest level of assurance; an independent review of the accounting records for fairness and reliability of the financial reports.
Definition of implied contract
A contract established when acceptance can be inferred from the actions of the parties, even if no express acceptance is proved.
Define Bookkeeping
The process of recording business data in a prescribed manner.
What is the 1099 form used for?
Report compensation paid to non-employee workers
Accounts receivable
A charge against a debtor, often from sales or services rendered. Not necessarily due or past due. Current asset arising from standard business operations.
Define accounting
The art of measuring, communicating, and interpreting financial activity.
Direct labor
Includes any actions that directly contribute to the delivery of patient care or customer service.
General ledger
The formal accounting record containing all of an organizations financial statement accounts.
Chart of accounts
A systematic list of all accounts in a general ledger, each accompanied by a reference number.
Indirect Labor
Includes all work-related actions that do not directly result in patient care or customer service. This includes attending staff meetings, CE, training bookkeeping, inventory management.
Accounts payable
A debt owed to a creditor often as a result of the purchase of merchandise, materials, supplies or services. An account payable is normally a current liability.
Balance sheet
A financial statement that lists a firm’s assets, liabilities and owners equity at a specific point in time. No specific date.
Feasibility study
Critical step in business planning process.
Outline and evaluate several alternatives for achieving business goals and identify the most financially viable method.
Burn Rate
The amount of overhead expenses and other costs in excess o revenue that a firm incurs.
Direct and indirect ratio
1:1
Depreciation
The process of allocating the cost of an asset across the time period for which is provides benefit. Depreciation is a non-cash expense.
Fair market value
Value negotiated at arms length between a willing buyer and willing seller, each acting rationally in their own self interest with knowledge of all relevant facts.
Safety Stock
An inventory cushion, in excess of lead time quantity, to help prevent a stock out if the shipment is delayed or the item is placed on back order.
Define Asset
Everything of value owned by a period, company, or corporation. Assets are usually classified as either tangible or intangible.
Anything the business owns.
Define vertical level of income
Expanding existing services, increasing return rates, etc.
Define horizontal level of income
Adding products or services, satellite facilities, etc.
Define zero-based budgeting
Starting with the assumed profit level required to make the practice grow at the desired rate in the upcoming year and then looking at the current and possible income potentials.
Define pro forma statement
Projected income statements and balance sheets that aid in profit-planning.
Define ProSal Formula
A form of compensation where employees are guaranteed specified based salaries, but are paid a percentage of their gross income collected by their employers when this yields a higher take-home pay than they would earn from a flat salary.
Define revenue
The price of goods sold and services rendered during a given period of time.
Define cash flow statement
Details inflows and outflows of cash between two points in time.
Define income statement
Reports values that have accumulated between two points in time; also known as the Profit and Loss Statement.
Define Balance sheet
Summarizes the assets, liabilities, and owner’s equity at a particular date.
What is the account equation formula?
Assets = Liability + Owner’s Equity
Define owner’s equity
The interest or claim of the practice owners in the practice assets; what the practice owes its owners.
Define liabilities
Present obligations resulting from past transactions that require the practice to pay money, provide goods, or perform services in the future.
Define transaction
The occurrence of an event or condition that must be recorded.
Level of assurance: Define review
Middle level of assurance; CPA conducts a higher level of analytic review of various accounts and transactions.
Level of assurance: Define compilation
Lowest level of assurance; CPA assesses and makes adjustments to bookkeeping data and supporting documentation provided by the hospital.
Operating Budget
The most common budget format encompasses a 12-month period of operations. Operating budgets typically include those items found on a profit and loss statement, but not usually items found on a balance sheet or cash-flow statement.
MACRS
Modified Accelerated Cost Recovery System
The depreciation method used since 1986 for deducting the value of depreciable property other than real estate. MACRS depreciation is faster than straight-line depreciation. MACRS is less favorable than the prior ACRS system.
ROI
Return on investment. A measure of profitability used to refer to a single project and expressed as a ratio; revenue generated divided by the average cost of assets consumed as part of the project.
Net profit margin
Practice profit divided by practice revenue equals net profit margin
Average transaction charge
Practice revenue divided by practice transactions equals average transaction charge
Revenue per FTE veterinarian
Practice revenue divided by FTE veterinarians equals revenue per FTE veterinarian
Accounts Receivable turnover
Credit sales divided by average accounts receivable equals average receivable turnover.
Average accounts receivable
Beginning accounts receivable plus ending accounts receivable divided by two equals average A/R
Days in accounts receivable
Numbers of days in period divided by accounts receivable turnover equals days in accounts receivable
Average inventory formula
beginning inventory plus ending inventory divided by two
