Question 1

Charity care is reported as both revenue and expense bad debt) in the Statement of Operations.

Accepted Answer

Patient service revenue does not include charity care.

Question 2

With respect to health care organizations, expenses must be reported using their natural classifications.

Accepted Answer

Expenses may be reported either by natural classification salaries, supplies, etc.) or functional classification professional care of patients, general services, etc.. Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

Question 3

Patient Service Revenue of hospitals is to be presented net of contractual adjustments in the Statement of Operations.

Accepted Answer

Patient service revenues are to be reported in the operating statement net of the provision for uncollectible accounts and estimated contractual adjustments with Medicare, Medicaid or insurance companies.

Question 4

Patient service revenue for a hospital does not include charges for charity care.

Accepted Answer

Patient service revenue does not include charity care.

Question 5

The AICPA Audit and Accounting Guide: Health Care Organizations applies equally to private not-for-profit, governmentally owned, and investor-owned health care organizations.

Accepted Answer

The AICPA Audit and Accounting Guide: Health Care Organizations applies equally to private not-for-profit, governmentally owned and investor-owned health care organizations.

Question 6

Health care organizations that are privately owned and operated to provide a return to investors follow GASB standards.

Accepted Answer

Health care organizations that are privately owned and operated to provide a return to investors follow FASB standards excluding those standards specifically for not-for-profits.

Question 7

For hospitals, contractual adjustments to 3^rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

Accepted Answer

Contractual Adjustment is a contra revenue account, not an expense.

Question 8

According to The AICPA Health Care Guide, transfers among affiliated organizations should be included in the determination of a performance indicator for a health care organization.

Accepted Answer

Net income loss) is an example of a performance indicator. Transfers among affiliated organizations are not included in the calculation of a performance indicator.

Question 9

Health care organizations that are privately owned and operated to provide a return to investors report the same net asset classifications as private not-for-profit health care organizations.

Accepted Answer

Net asset classification for an investor-owned health care enterprise uses paid in capital and retained earnings. A not-for-profit business-oriented organization uses Unrestricted Net Assets, Temporarily Restricted Net Assets and Permanently Restricted Net Assets.

Question 10

The level of charity care is included in revenue and should be disclosed in the notes to financial statements.

Accepted Answer

Patient service revenue does not include charity care.

Question 11

Differences between actual and estimated contractual adjustments are treated as changes in accounting estimates.

Accepted Answer

Like uncollectible accounts, differences between actual contractual adjustments and the amounts estimated are treated as changes in accounting estimate and included in the account period of the change.

Question 12

The AICPA Health Care Guide prescribes a separate Statement of Operations and Statement of Changes in Net Assets rather than a Statement of Activities.

Accepted Answer

Activities revenues, expenses and reclassifications are divided between two financial statements; a Statement of Operations and a Statement of Changes in Net Assets.

Question 13

The AICPA Health Care Guide does not require a performance indicator in the financial statements of private sector not-for-profit health care providers.

Accepted Answer

The AICPA Health Care Guide requires a performance indicator commonly called net income or loss in the financial statements of private sector not-for-profit health care providers.

Question 14

Contractual adjustments from insurance companies are reported as expenses in the Statement of Operations.

Accepted Answer

Patient service revenues are to be reported in the operating statement net of the provision for uncollectible accounts and estimated contractual adjustments with Medicare, Medicaid or insurance companies.

Question 15

Voluntary health and welfare organizations raise a significant amount or nearly all of their resources from contributions and grants, and are subject to the rules of the AICPA Not-for-Profit Guide.

Accepted Answer

Voluntary health and welfare organizations are subject to the rules of the AICPA Not-for-Profit Guide.

Question 16

Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

Accepted Answer

Expenses may be reported either by natural classification salaries, supplies, etc.) or functional classification professional care of patients, general services, etc.. Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

Question 17

The cash flow statements of private health care organizations, both not-for-profit and for-profit, may use only the indirect method.

Accepted Answer

The Statement of Cash Flows for a not-for-profit hospital can be prepared using either the direct or indirect method. The direct method is required for a governmental health care organization.

Question 18

According to The AICPA Health Care Guide, transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

Accepted Answer

Net income loss is an example of a performance indicator. Transfers among affiliated organizations are not included in the calculation of a performance indicator.

Question 19

For hospitals, contractual adjustments to 3^rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustments a contra-revenue account and a credit to Patient Accounts Receivable.

Accepted Answer

The journal entry would be a debit to Contractual adjustments - Unrestricted and a credit to Patient Accounts Receivable.

Question 20

Health care organizations that are privately owned and operated to provide a return to investors follow FASB standards excluding those standards specifically for not-for-profits.

Accepted Answer

Private for-profit health care organizations follow FASB standards excluding those written specifically for-not-for profits.

Quiz 12: Accounting for Hospitals and Other Health Care Providers

Charity care is reported as both revenue and expense bad debt) in the Statement of Operations.

With respect to health care organizations, expenses must be reported using their natural classifications.

Patient Service Revenue of hospitals is to be presented net of contractual adjustments in the Statement of Operations.

Patient service revenue for a hospital does not include charges for charity care.

The AICPA Audit and Accounting Guide: Health Care Organizations applies equally to private not-for-profit, governmentally owned, and investor-owned health care organizations.

Health care organizations that are privately owned and operated to provide a return to investors follow GASB standards.

For hospitals, contractual adjustments to 3rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

According to The AICPA Health Care Guide, transfers among affiliated organizations should be included in the determination of a performance indicator for a health care organization.

Health care organizations that are privately owned and operated to provide a return to investors report the same net asset classifications as private not-for-profit health care organizations.

The level of charity care is included in revenue and should be disclosed in the notes to financial statements.

Differences between actual and estimated contractual adjustments are treated as changes in accounting estimates.

The AICPA Health Care Guide prescribes a separate Statement of Operations and Statement of Changes in Net Assets rather than a Statement of Activities.

The AICPA Health Care Guide does not require a performance indicator in the financial statements of private sector not-for-profit health care providers.

Contractual adjustments from insurance companies are reported as expenses in the Statement of Operations.

Voluntary health and welfare organizations raise a significant amount or nearly all of their resources from contributions and grants, and are subject to the rules of the AICPA Not-for-Profit Guide.

Private sector not-for-profit health care entities must disclose expenses by functional classifications, if not provided in the Statement of Operations.

The cash flow statements of private health care organizations, both not-for-profit and for-profit, may use only the indirect method.

According to The AICPA Health Care Guide, transfers among affiliated organizations should not be included in the determination of a performance indicator for a health care organization.

For hospitals, contractual adjustments to 3rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustments a contra-revenue account and a credit to Patient Accounts Receivable.

Health care organizations that are privately owned and operated to provide a return to investors follow FASB standards excluding those standards specifically for not-for-profits.

For hospitals, contractual adjustments to 3^rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustment expense and a credit to Accounts Receivable.

For hospitals, contractual adjustments to 3^rd party payers, such as insurance companies, are recorded with a debit to Contractual Adjustments a contra-revenue account and a credit to Patient Accounts Receivable.