Financial Management Flashcards
Banking- Cashier’s Check
A check the bank prepares, signed by bank official, that is directly drawn from a person’s account.
Certified Check
A check that the bank authenticates and guarantees by setting aside the funds until it is presented for payment.
Counter Check
A check that the bank prepares as a substitute for a regular check to permit the drawer to withdraw funds.
Money order
Similar to cashiers check, but can be purchased at the post office or convenience store.
Limited Check
A check that is restricted by amount and time of negotiability.
Traveler’s check
Special check prepared for those who are traveling or where personal check is not accepted or where carrying cash is not prudent.
Trial Balance
A list of all account balances to determine whether the debts equal the credits.
Balance Sheet
Is a statement that summarizes assets, liabilities and capital balances.
Income Statement
A financial statement that summarizes revenue and expense for a specified period.
Journal
An account document that serves to record all daily transaction.
General Journal
Is the book of all original entry of all transactions.
Account Balance
The balance of an account will be the difference between the debt amount and the credit amount.
Blank endorsement
The check has only the payee’s signature. Thus making to any bearer.
Restrictive Endorsement
The payee directs how the check is to be paid, such as “for deposit only”.
Bank
Is also known as a “drawer”.
Drawer
- The depositor
- The person writing the check
Drawee
The bank in which the drawer has money on deposit.
Payee
The party to receive the money as I reacted by the drawer.
Types of checks
- Cashier’s check
- Certified check
- Counter check
- Limited check
- Money orders
- Traveler’s check
MICR
Magnetic Ink Character Recognition.
- preprinted forms containing MICR characters that can be read by a machine.
- The MICR include an ABA (American Banking Association) number that indicates where the bank is located and information
needed to sort and route deposit tickets and checks.
Check stub
Small form to the left of each check that contains spec to record all relevant information about a check and checking account balance.
Check register
Information recorded on the check stub, instead recorded in a booklet maintained with the bound check.
Dishonored checks
A check the bank refuses to pay generally because of insufficient funds deposited. (NSF- not sufficient funds).
Post dated checks
Checks dated after the date is was written.
Bank statement
Statement of account rendered to each depositor once a month by a bank.
- Balance on deposit at the beginning of the month. - Amount of deposit credited during the period. - Amount f checks honored (debited) during the period. - other items debited or credited during the period. - Balance on deposit at the end of the period.
Bank statement reconciliation
Is the process of adjusting both balances to reflect the transaction not represented by both the bank statement and check register in order to determine the true balance of the account. If done properly, the check register and the bank statement balance should agree after the adjustments have been made.
Reconciliation procedure
- Compare the deposited amounts recorded on the check register with those shown on the bank statement.
- Compare the canceled amounts with those stated on the bank statement and check register.
- Identify ll debits and credits to the account listed on the bank statement.
- Errors found on the check register that mistakenly elevate be deducted or added to the check register, respectively. Errors
should be reported to the bank promptly and adjusted accordingly. - Add and subtract all of the bank statement and check register. Both adjusted should be equal.
Accounting & Bookkeeping
Describes the language of business, it’s the process of recording, classifying, summarizing, reporting, analyzing, and interpreting financial and economic data.
Accounting & Bookkeeping purpose
Provide financial information regarding the current operation to interested parties, especially outsiders.
- Financial condition of a business: Profitability and solvency. - Managerial performance - Effectiveness and efficiency of operations - Compliance with directive regulations
Accounting & Bookkeeping- “users of accounting information”
- Owners/managers
- Creditors
- Government agencies
- Accrediting agencies
- Third-party payers
Accounting & Bookkeeping- “Accounting elements”
- Assets
- Money
- Land/ building/ fixtures/ furnishings
- Machinery/ equipment
- Accounts receivable
- Securities
Accounting & Bookkeeping- “Assets”
Property of value owned or controlled by a business.
Accounting & Bookkeeping- “Securities”
Stocks and bonds.
Accounting & Bookkeeping- “Liabilities”
Debt obligations; creditor interest.
- Accounts payable: Suppliers/ vendors - Notes payable: Bank debits
Accounting & Bookkeeping- “Revenue”
Inflow of assets through sale of product or services. Has the effect of increasing owner’s equity.
Accounting & Bookkeeping- “Owner’s equity”
The amount by which assets exceed liabilities; net worth; ownership interest; capital.
- Revenue - Expense - Drawing
Accounting & Bookkeeping- “Expense”
Outflow of assets to generate revenue. Has the effect of reducing owner’s equity.
Accounting & Bookkeeping- “Drawing”
Withdrawal of assets for personal use. Has the effect of reducing owner’s equity.
Accounting & Bookkeeping- “Accounting equation”
- Assets = Liabilities + Owner’s Equity
- Liabilities = Assets + owner’s Equity
- Owner’s Equity = Assets - Liabilities
Accounting & Bookkeeping- Bookkeeping system
- Single-entry system
- Double entry system
Bookkeeping- Single-entry “system”
All transaction are recorded once using a pegboard system.
- Materials
- Pegboard
- Journal
- Ledger cards
- Charge slip/ receipt
Bookkeeping- Single entry
“Pegboard”
Lightweight metal or plastic board that contains pegs along the left edge to hold the corresponding perforated accounting document.
Bookkeeping- Single entry
“Journal”
A page that approximate the size of the pegboard also known as the daysheet, daybook, or daily log. Maintains a record of all daily charges (fees) and receipts.
Bookkeeping- Ledger cards
Records of all fees and payments for each patient.
Bookkeeping- Charge slip/ receipt
- A form used to record a charge to serve as a bill, or as a receipt given to the patient for a fee payment.
- Superbill: Multicopy charge slip that may be retained by the clinic, patient and insurance carrier.
Bookkeeping- Double entry
Each transaction is recorded in a way that maintains a balancing of the accounting elements.
Bookkeeping- Double entry
Account
Double entry- Account:
- A record used to keep track of the increases and decreases to each element of the accounting equation.
- Title and account number
- Debit and credit column
- Date column
- Posting reference
Bookkeeping- Double entry
“Trial balance”
Trial Balance:
- A list of all accounts by titles and their respective debit or credit balance.
Bookkeeping- Double entry
“Financial statement”
- Income statement (profit-loss statement)
- Balance sheet
Bookkeeping- Double entry- Financial statement
“Income statement”
Income statement (profit-loss statement:
- Summarizes revenue and expenses to determine the level of profit or loss.Bookkeeping- Double entry- Financial statement
“Balance sheet”
Balance sheet:
- Summarizes the assets, liabilities, and owner’s equity at a specific date.
Bookkeeping- Double entry- “Accounting documents”
Accounting documents:
- Source documents - Chart of account - Journal - Ledger
Bookkeeping- Double entry- Accounting documents
“Source documents”
Source documents:
- Any document that indicates a transaction has occurred such as a receipt.
Bookkeeping- Double entry- Accounting documents
“Chart of accounts”
Chart of accounts:
- A list and numbering of all accounts.
Bookkeeping- Double entry- Accounting documents
“Journal”
Journal:
- A book of original entry that serves as a chronological record of all daily business transaction.
Bookkeeping- Double entry- Accounting documents
“Ledger”
Ledger:
A collection of individual records of each account.
- General ledger
- Account receivable ledger
- Accounts payable ledgerBookkeeping- Double entry- Accounting document- Ledger
General ledger
General Ledger:
- Asset, liability, and capital accounts grouped together.
Bookkeeping- Double entry- Accounting document- Ledger
“Accounts receivable ledger”
Accounts receivable ledger:
- A ledger of all persons and businesses that own money to the company.
Bookkeeping- Double entry- Accounting document- Ledger
“Accounts payable ledger”
Accounts payable ledger:
- A ledger of all businesses the company owes money to.
Bookkeeping- Double entry
“Accounting Process”
Accounting process:
- The source document is reviewed to determine whether it should be ordered as a transaction.
- Journalize
- Posting
- Adjustment
- Closing
- Trial balance
- Accounting statement
Bookkeeping- Double entry- Accounting Process
“Journalize”
Journalize:
- Daily transactions are recorded in the journal as debits and credits.
Bookkeeping- Double entry- Accounting Process
“Posting”
Posting:
- Periodically, the information recorded in the journal is transferred to each ledger record reserved for the account debited or credited in the journal.
Bookkeeping- Double entry- Accounting Process
“Adjustments”
Adjustments:
- Accounts are adjusted for any changes in the amounts not already recorded.
Bookkeeping- Double entry- Accounting Process
“Closing”
Closing:
- Expense and revenue accounts are closed (zeroed out) at the end of the accounting period.
Bookkeeping- Double entry- Accounting Process
“Trial Balance”
Trial balance:
- At the end of an accounting period (month or year), a trial balance is prepared.
Bookkeeping- Double entry- Accounting Process
“Accounting Statements”
Accounting statements:
- From the trial balance an income statement and balance sheet is prepared.
Bookkeeping- Accounts “Receivable”
Accounts receivable:
- Fees owed by patients for service rendered.
- Often clinics receive less than the total charge for patient services due to:
- Uncollectible accounts balance
- Charity allowance
- Contractual allowance (discounts)
- Courtesy allowance
Bookkeeping- Accounts Receivable
“Uncollectible Accounts Allowance”
Uncollectible accounts allowance:
- bad debts, unpaid fees
Bookkeeping- Accounts Receivable
“Charity Allowance”
Charity allowance:
- Discounts given to indigent patients.
