Question 1

A hospital reported the following uncollectible amounts:
$ 25,000 for services rendered to homeless individuals with no intention of collection.
$ 73,000 for services rendered with the expectation of collection, but which proved to be uncollectible.
What amount should be reported in revenues and provision for bad debt for these items?

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations. Revenue of $30,000 should be recorded for services rendered with the expectation of collection and the provision for bad debt recorded for the amount that is uncollectible.

Question 2

During the month of December, Mary & David Memorial Hospital billed patients $45,000, billed 3^rd parties $55,000, and provided $15,000 of charity care. How much should the hospital report as gross) Patient Service Revenue?

Accepted Answer

$45,000 billed to patients + $55,000 billed to third parties = $100,000. Charity care is not included in revenues.

Question 3

Private not-for-profit health care organizations include what categories in the equity section of the Statement of Changes in Net Assets?

Accepted Answer

The categories in the equity section of the Statement of Changes in Net Assets for private not-for-profit health care organizations are unrestricted, temporarily restricted, and permanently restricted.

Question 4

Which of the following is/are true with respect to health care organizations?

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 5

When accounting for health care organizations, services provided for charity care are:

Accepted Answer

Patient service revenue does not include charity care. Instead, the amount of charity care is disclosed in the notes. Expenses related to charity care are deducted on the Statement of Operations.

Question 6

Contractual allowances for amounts billed to 3^rd parties are treated as:

Accepted Answer

The journal entry would be a debit to Contractual Adjustments - Unrestricted and a credit to Patient Accounts Receivable. Contractual Adjustments - Unrestricted is a contra-revenue account.

Question 7

A private not-for-profit entity estimated its Allowance for Contractual Adjustment. During the next year, the hospital found that the actual total of contractual adjustments applied to receivables on hand at the end of the previous year was $ 4,000 higher than the estimate. How should the difference be reported?

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 by reducing patient service revenue.

Question 8

According to the AICPA Audit and Accounting Guide: Health Care Organizations, which of the following items should be included in the determination of the performance indicator?

Accepted Answer

Other revenue, such as parking lot or cafeteria revenue and net assets released from restrictions for operating purposes are both included in the calculation of operating income.

Question 9

Which of the following is true regarding revenue recognition for health care organizations?

Accepted Answer

Patient service revenue is presented net of contractual adjustments. Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations. Other revenues on the Statement of Operations include revenues from activities such as parking lot, gift shop, cafeteria and tuition.

Question 10

Which of the following is a required statement for a governmental hospital?

Accepted Answer

The required statements for a governmental hospital are MD&A, Statement of Net Position, Statement of Revenues, Expenses and Changes in Fund Net Position, Statement of Cash Flows, Notes to the Financial Statements and RSI other than MD&A.

Question 11

A hospital reported the following uncollectible amounts:
$ 10,000 for services rendered to homeless individuals with no intention of collection.
$ 30,000 for services rendered with the expectation of collection, but which proved to be uncollectible.
What amount should be reported in revenues and provision for bad debt for these items?

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations. Revenue of $30,000 should be recorded for services rendered with the expectation of collection and the provision for bad debt recorded for the amount that is uncollectible.

Question 12

According to AICPA Health Care Guide, which of the following should not be included in the determination of a performance indicator for a health care organization?

Accepted Answer

The Audit and Accounting Guide identifies the following items that should not be included in the determination of operating income: 1) transactions with the owners, other than in exchange for services, 2) transfers among affiliated organizations, 3) Receipt of temporarily or permanently restricted contributions, 4) items identified by FASB standards as elements of other comprehensive income, 5) items requiring separate display and 6) unrealized gains and losses on investments other than those classified as trading securities.

Question 13

Which of the following is false regarding revenues of health care organizations?

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations.

Question 14

Investor owned health care organizations have the following equity section accounts:

Accepted Answer

The equity section of an investor owned health care organization consists of paid in capital and retained earnings.

Question 15

St. Mary's Medical Center performed charity care at a cost supplies etc. of $21,000. The standard charge to patients for these services is $63,000. How much should the hospital recognize as revenue?

Accepted Answer

Patient service revenue does not include charity care. Expenses related to charity care are deducted on the Statement of Operations.

Question 16

An unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for future use is called:

Accepted Answer

Assets whose use is limited is an unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for the future.

Question 17

Private health care organizations follow _____ standards while governmentally owned health care organizations follow _____ standards.

Accepted Answer

Private not-for-profit health care organizations follow FASB standards, including those specifically applicable to not-for-profits. Private for-profit health care organizations follow FASB standards excluding those written specifically for-not-for profits. If a health care organization is owned or controlled by a government, it is typically considered a special-purpose entity engaged only in business-type activities and would use proprietary fund accounting and follow GASB.

Question 18

If a clinic raises a significant amount or nearly all their resources from voluntary contributions or grants, they are subject to the guidance in the AICPA:

Accepted Answer

If a health care organization raises a significant amount or nearly all their resources from voluntary contributions or grants, they are subject to the guidance in the AICPA Not-for-Profit Guide.

Question 19

The difference between accounting for private not-for-profit hospitals and government- owned hospitals is:

Accepted Answer

Public and private sector health care organizations measure transactions and events similarly, but use different equity accounts, reflecting the varying ownership categories.

Question 20

The difference between the financial statements of private not-for-profit hospitals and private not-for-profit voluntary health and welfare organizations is:

Accepted Answer

The required statements for private not-for-profit organizations are the Statement of Financial Position, Statement of Activities and Statement of Cash Flows. In addition, voluntary health and welfare organizations are required to report a Statement of Functional Expenses that shows expenses by both function and natural classification.

Quiz 12: Accounting for Hospitals and Other Health Care Providers

During the month of December, Mary & David Memorial Hospital billed patients $45,000, billed 3^rd parties $55,000, and provided $15,000 of charity care. How much should the hospital report as gross) Patient Service Revenue?

Private not-for-profit health care organizations include what categories in the equity section of the Statement of Changes in Net Assets?

Which of the following is/are true with respect to health care organizations?

When accounting for health care organizations, services provided for charity care are:

Contractual allowances for amounts billed to 3^rd parties are treated as:

According to the AICPA Audit and Accounting Guide: Health Care Organizations, which of the following items should be included in the determination of the performance indicator?

Which of the following is true regarding revenue recognition for health care organizations?

Which of the following is a required statement for a governmental hospital?

According to AICPA Health Care Guide, which of the following should not be included in the determination of a performance indicator for a health care organization?

Which of the following is false regarding revenues of health care organizations?

Investor owned health care organizations have the following equity section accounts:

St. Mary's Medical Center performed charity care at a cost supplies etc. of $21,000. The standard charge to patients for these services is $63,000. How much should the hospital recognize as revenue?

An unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for future use is called:

Private health care organizations follow _ standards while governmentally owned health care organizations follow _ standards.

If a clinic raises a significant amount or nearly all their resources from voluntary contributions or grants, they are subject to the guidance in the AICPA:

The difference between accounting for private not-for-profit hospitals and government- owned hospitals is:

The difference between the financial statements of private not-for-profit hospitals and private not-for-profit voluntary health and welfare organizations is:

Quiz 12: Accounting for Hospitals and Other Health Care Providers

During the month of December, Mary & David Memorial Hospital billed patients $45,000, billed 3rd parties $55,000, and provided $15,000 of charity care. How much should the hospital report as gross) Patient Service Revenue?

Private not-for-profit health care organizations include what categories in the equity section of the Statement of Changes in Net Assets?

Which of the following is/are true with respect to health care organizations?

When accounting for health care organizations, services provided for charity care are:

Contractual allowances for amounts billed to 3rd parties are treated as:

According to the AICPA Audit and Accounting Guide: Health Care Organizations, which of the following items should be included in the determination of the performance indicator?

Which of the following is true regarding revenue recognition for health care organizations?

Which of the following is a required statement for a governmental hospital?

According to AICPA Health Care Guide, which of the following should not be included in the determination of a performance indicator for a health care organization?

Which of the following is false regarding revenues of health care organizations?

Investor owned health care organizations have the following equity section accounts:

St. Mary's Medical Center performed charity care at a cost supplies etc. of $21,000. The standard charge to patients for these services is $63,000. How much should the hospital recognize as revenue?

An unrestricted balance sheet category used in health care reporting to show limitations on the use of assets due to bond covenant restrictions and governing board plans for future use is called:

Private health care organizations follow _____ standards while governmentally owned health care organizations follow _____ standards.

If a clinic raises a significant amount or nearly all their resources from voluntary contributions or grants, they are subject to the guidance in the AICPA:

The difference between accounting for private not-for-profit hospitals and government- owned hospitals is:

The difference between the financial statements of private not-for-profit hospitals and private not-for-profit voluntary health and welfare organizations is:

During the month of December, Mary & David Memorial Hospital billed patients $45,000, billed 3^rd parties $55,000, and provided $15,000 of charity care. How much should the hospital report as gross) Patient Service Revenue?

Contractual allowances for amounts billed to 3^rd parties are treated as:

Private health care organizations follow _ standards while governmentally owned health care organizations follow _ standards.