Presentation on theme: "PRACTICE FINANCES Chapter 10. 2 Practice Finances Learning Objectives Define five accounting terms related to the responsibilities of the administrative."— Presentation transcript:
PRACTICE FINANCES Chapter 10
2 Practice Finances Learning Objectives Define five accounting terms related to the responsibilities of the administrative medical assistant. Demonstrate an understanding of accounting principles by explaining the procedures for maintaining two of the essential financial records. List three banking duties of the assistant. List the duties of the assistant related to the payroll process. Explain how an employee’s net salary is determined.
Chapter 104 Key Terms (cont’d) Employer identification number (EIN) E-signature FICA Full endorsement FUTA Indirect earnings Interest Monthly summary Patient ledger cards Payroll Pegboard accounting Petty cash fund Posting Practice analysis report Procedure day sheet Restrictive endorsement
Chapter 105 Essential Financial Records Accounting Methodical recording, classifying, and summarizing of business transactions Bookkeeping Accurate recording of transactions
Chapter 106 Essential Financial Records (cont’d) Cash basis Expenses are recorded when actually paid Income not recorded until payment is actually received Accrual basis Income is recorded when earned Expenses are recorded when incurred
Chapter 107 Essential Financial Records (cont’d) Daily journal Also called general journal or day sheet Charge/receipt slips Record of physician’s services and charges Ledgers Patient ledger cards Accounts receivable ledger Accounts payable ledger Summaries Monthly summary Annual summary Balance sheet Day Sheet ROA ROA 37.00
Chapter 108 Accounting Software Specialized software for medical practices is available Saves time by automating routine tasks Accurately completes mathematical calculations
Chapter 109 Daily Journal For recording the daily fees charged and payments received Accounts receivable Cash receipts Helps to keep control of amount of money owed to practice Used to account for daily cash flow Software, such as NDCMedisoft, provides an electronic daily journal
Chapter 1010 Bookkeeping Methods Single-entry method One entry for each transaction Double-entry method Uses debits and credits Pegboard method “Write it once” system Multiple layers of forms
Chapter 1011 Summaries Used to analyze charges, cash receipts, and disbursements Compare current financial performance with past financial performance Software easily manipulates databases to produce summaries Practice analysis reports Aging reports Spreadsheet capabilities
Chapter 1012 Banking Absolute accuracy Promptness Administrative medical assistant acts as physician’s agent
Chapter 1013 Checks and Checking Interest bearing account Regular business checking account Negotiable checks Contain the specific amount to be paid Are properly completed Unacceptable checks Postdated checks Predated checks Third-party checks Checks with “paid-in-full” annotation when amount is not full amount
Chapter 1014 Endorsements Blank endorsement Payee signs name Full endorsement Payee signs name, company, bank, account number, etc. Restrictive endorsement (safest) Marked “For Deposit Only” Payee signs name, company, bank, account number, etc.
Chapter 1015 Deposits and Returned Checks Deposits Daily practice Cash flow management All cash and checks Complete and accurate deposit slips Bank receipts Security of checkbook and other banking materials Returned checks Incorrectly written checks Incomplete checks “Non-sufficient Funds”
Chapter 1016 Bank Reconciliation Statement balance is compared with checkbook balance Compare canceled checks with items listed on statement Compare checks listed on statement with checkbook to verify accuracy Account for deductions such as service charges Compare deposits against credits on bank statement Record any interest earned Complete the reconciliation form
Chapter 1017 Electronic Banking Using software for Checking balances Receiving electronic deposits Finding out which checks have cleared Transferring money between accounts Paying bills Must still record all checks and deposits Must still reconcile statement E-signatures Same legal standing as written signatures Electronic funds transfer (EFT)
Chapter 1018 Petty Cash Small amounts of cash used for small expenses Delivery charges, cab fares, postage stamps Petty cash register or voucher Provides record of small expenses Ensures only authorized payments are made Security “Proving petty cash”
Chapter 1019 Payroll Calculate the earnings of employees Subtract taxes and other deductions Create employee payroll records Prepare the salary checks Submit payroll taxes Use current tax formulas and abide by IRS regulations
Chapter 1020 Payroll Records Need for accurate records Employer Identification Number (EIN) Employee data Identified by Social Security Number Non-U.S. citizens must complete an Employment Eligibility Verification Form Pay schedule Type of payment—hourly or salaried Employee-requested deductions
Chapter 1021 Payroll Taxes Direct earnings Salaries or wages paid to employees Indirect earnings Paid leave or specific employer- paid benefits W-4 form Employee’s allowances or exemptions
Chapter 1022 Payroll Taxes (cont’d) FICA tax Social security contributions 2 separate deductions 1 for Medicare 1 for pension benefits 1/2 paid by employee 1/2 paid by employer Contribution percentage changes yearly
Chapter 1023 Calculating Payroll Voluntary deductions Employer’s obligation Net earnings Gross earnings Exemptions and state and local deductions FICA taxes Unemployment taxes
Chapter 1024 Employer’s Tax Responsibilities Federal Unemployment Tax Act (FUTA) May also pay into state unemployment fund Some states also require employee contributions Taxes must be paid to the federal government monthly Employers are required to file a quarterly tax return For reporting federal income and FICA taxes
Chapter 1025 Payroll Records Records must, by law, be retained for 4 years Employee earnings records should contain: Net salary paid Income taxes withheld FICA, state, and local taxes deducted Other deductions Employee’s name and SSN Address Number of exemptions Gross salary earned
Chapter 1026 Electronic Payroll Also called direct deposit Employee’s net pay is automatically withdrawn from practice account, AND Deposited into the employee’s account Electronic Funds Transfer (EFT) Loss or theft of paychecks is eliminated Productivity is increased Convenience of eliminating trips to the bank
Chapter 1027 Quiz day sheet Net restrictive False, both the employee and the employer must pay FICA taxes. The _____________ endorsement is most often used by businesses. Another name for the daily journal is ___________. FICA taxes are the responsibility of the employee. (T/F) _____ pay is the amount paid to the employee.
Chapter 1028 Critical Thinking What is the difference between a cash basis and an accrual basis in accounting? With a cash basis, expenses are recorded when they are actually paid and income when payment is actually received. With an accrual basis, expenses are recorded when they are incurred and income when it is earned.