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Chap 24

Financial records that are complete, correct, and current are essential for what??
-prompt billing and collection procedures
-accurate budgeting
-professional financial planning
-accurate reporting of incoome to federal and state agencies
Define Accounting??
a system of recording, classifying, and summarizing financial transactions
Define Bookkeeping??
is the recording part of the accounting process
Which two general bases, or methods, of accounting are used??
cash basis and the accrual basis
Which method most physicians use in accounting bases??
cash basis of accounting.
What is Cash basis of accounting??
charges for services are entered as income when payment is received, and expenses are recorded when they are paid
What is Accrual basis of accounting??
method of acconting in which income is recorded when earned and expenses are recorded when incurred
The financial records of any business should show the following at all times??
-how much was earned in a given period
-how much was collected
-how much is owed
-the distribution of expenses incurred
Periodic analyses of financial records result in what??
-improved business practices, better time mgmt, curtailment or elimination of unprofitable services, and better budgeting of expenses
Whats the rule of bookkeeping??
– first, use good penmanship so that the records are clearly legible, even yrs later
-use the same pen style and type of ink consistently
-keep columns of figures straight and write well-formed figures
When should the MA used the petty cash fund??
to pay for small, unpredictable expenses
What are the don’ts in bookkeeping?
do not erase, write over, or blot out figures
What is a daily journal??
the chronologic record of the practice (e.g. the financial dairy)
Whats the day sheet used for?/
for practices that use a manual pegboard system
What should the disbursement journal must show??
-every amount paid out
-date and check number
-purpose of the payment
What are sum examples for petty cash and voucher system should be used??
for postage due, parking fees, small contributions, emergency supplies, and miscellaneous small items
What is a single-entry system ??
very basis and usually is used in small business, such as a one-physician office or a partnership that sees a relatively small number of pts
Whats are sum advantages of single-entry system??
inexpensive, easy to use, and require little training
What are the required three basis records for single-entry system??
-general journal
-cash payment journal
-accounts receivable ledger
What is the general journal??
is a record (a day sheet) where transactions are entered
What is the cash payment journal??
in its simplest form is a record ( a checkbook) that is used to make payments
What is the accounts receivable ledger??
provides info about the amount owed the physician
What are sum advantages of double-entry bookkeeping??
inexpensive, but requires a trained, experienced bookkeeper or the regular services of an accountant
How is double-entry bookkeeping??
the transactions may be recorded manually or by computer, every transations requires an entry on each side of the accounting equation and both sides must be balance
What is Assets??
the properties owned by a business, such as bank accounts, accounts receivable, buildings, equipment, and furniture
What are the rt to assets??
equities
What is the equity of the owner called??
capital, proprietorship, or owner’s equity
The equities of the creditors to whom money is owed are called??
liabilities
Double-entry bookkeeping is not frequently used where??
small practice
What are the parts for the end of day summary??
-First part is the proof of posting section, which deals with the transaction that occurred that day on the day sheet
-Second section is the month-to-date accounts receivable proof; adding the days totals to the MTD totals should be balance
-Last section is the year-to-date accounts receivable proof; which adds the accounts, including the day’s totals, to the YTD
If the end of the day summarizing does not balance, what should the MA do next??
check the addition of each column, both horizontally and vertically; in most cases this reveals the error
When should the Trial balance be done??
once a month after all posting has been completed and before the monthly statements are prepared
What is the purpose of a Trail balance??
to disclose any discrepancies btwn the journey and the ledger. it does not prove the accuracy of the accounts
What is the first step in locating an error in the trial balance??
find the difference btwn the two totals, then search the daily journal pages and account cards
When does the vender includes a packing slip?/
if an item is not paid for at the time of purchase,
What is a packing slip??
it describes the items enclosed
What is a invoice??
it describes the items and shows the amount due
What is the statment??
a request for payment
What are the steps when paying for purchases?/
at the time of payment, compare the statement with the invoice to verify its accuracy, fasten the statement and invoice together, write the datem the amount paid, and the check number on the statement, and place it in the paid file
What is a disbursement??
funds paid out
Describe Business expenses??
are tax deductible and are considered in determining net income from the practice
Describe Personal expenses?/
are not deductible in determining net income from the practice, some qualify as computing personal income tax
What would deductible expenses include??
property taxes, interest paid out, contributions
A accounting for petty cash is what??
revolving fund
Petty cash can be used for a variety of items such as??
expendable supplies, business meals, local transportation, photocopy service
How to establish the petty cash??
a check is written payable to cash or petty cash and entered in the disbursements journal under Miscellaneous
If the physician requests cash from the fund, what should the MA request?/
a personal check or an office check in exchange for cash from the fund when it is time to replenish the money
What is the Statement of income and expense also known as, and what does it list??
profit and loss statement, it list all the income received and all expenses paid during the period
The total income is called what??
gross income or earnings
What is the net income?
income after deduction of all expenses
A cash flow statement is what??
the amount of cash on hand at the beginning of the month ( or for any specified period)
The balance sheet is also known as what?
statement of financial condition
What does the government regulations requires??
the withholding of taxes from employees and payment of certain taxes by both employees and employers
How long all records of employment taxes must be kept??
at least four years
What are the records that should be kept for review by the IRS??
-SSN
-number of withholding allowances claimed
-amount of gross salary
-all deductions for Social Security and Medicare taxes
What is the employee’s tax identification number??
Social Security number
Which form is used to apply for a SSN??
SS-5
Which form is used when a employer applies for a number for federal tax accounting purposes??
SS-4
At the end of the first pay period, the employee should complete an employee’s withholding allowance certificate form??
W-4
If too little tax is taken out during the year, the employee may owe what??
a significant amount of money to the IRS the following yr
The amount to be withheld is based on what?
-Total earnings of the employee
-number of withholding allowances claimed
-marital status of the employee
-length of the pay period involved
A physician practicing as an individual is not subject to ______but is expected to make a estimated tax payment _______a year??
withholding tax, four times
All wages are subject to the Medicare tax at a rate of ____ ??
1.45%
Employers must file form _____, the transmittal of income and tax statement, annually to transmit wage and income tax withhels statements to the social security administration??
W-3
An annual Federal Unemployment Act (FUTA) return must be filed on what form??
940

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