HS 240 Welcome to Week 2 Medical Office Accounting Petra JonesHill,MBA

UNIT 2

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Agenda for Seminar Unit 2 Readings Financial Statements Discussion Board Homework Assignment Exam Conclusion

OVERVIEW During this week’s seminar, we will discuss and compare the figures in a Statement of Financial Position.

Great job last week! I enjoyed all the conversations.

Words of Encouragement If you can read a nutrition label or a baseball box score, you can learn to read basic financial statements. If you can follow a recipe or apply for a loan, you can learn basic accounting. The basics aren’t difficult and they aren’t rocket science.

There are four main financial statements. * Balance sheets * Income statements * Cash flow statements * Financial Statements

Describe a fiscal year?

What is a fiscal year? Any 12-month period that a company uses for accounting purposes. This is when an organization books for the year are opened and closed. Fiscal years vary between businesses and countries. Fiscal year may also refer to the year used for income tax reporting.

When does an organization end it’s fiscal year? What influences the conclusion of a fiscal years?

Influences to end a fiscal year: Make things easier and economical Availability of accountant and bookkeeper

Balance Sheet What information is included on an organizations balance sheet?

A balance sheet provides detailed information about a company’s assets, liabilities and shareholders’ equity.

INCOME STATEMENT Explain the information included on an income statement.

Income Statement Compares organization’s revenues to its expenses. Also called Operating Statement. Formal representation of what happened over the course of the accounting period. Revenues Monies received in exchange for the delivery of goods or services. Expenses Costs incurred to generate revenues

SIMPLE BALANCE SHEET

Discuss SIMPLE INCOME STATEMENT

SIMPLE INCOME STATEMENT Income statement or operating statement shows the revenue, expenses and profit for the company during the past year.

SIMPLE INCOME SHEET

Discuss: Statement of Cash Flows

Statement of Cash Flows Formal report of the organizations’ inflows and outflows of cash during the accounting period. -Separates cash flows from: Operating Activities Investing Activities Financing Activities

Simple of Cash Flow Statement

Notes to the Financial Statements Why are notes to the Financial Statements necessary?

Notes to the Financial Statements Notes to the financial statements are required. Numbers can’t tell the entire story. Helps provide detailed explanations of the information presented and the methods used to compile the financial statements.

Discuss: Asset Valuation

Historical Cost What did the asset cost to acquire? Driven by Generally Accepted Accounting Principle of Objective Evidence. Not necessarily the same is what an asset is currently worth. Historical cost may be adjusted for use by taking depreciation.

Discuss: Price-Level Adjusted Historical Cost

Inflation causes the value of assets to change over time. Constant Dollar Valuation Adjust assets by a price index such as the Consumer Price Index (CPI). Not all assets increase at the same rate of inflation.

DISCUSS: Net Realizable Value

-Set the asset value at what you could get if you sold the asset net of any costs to sell. -Problems: Based on subjective estimate of what an asset would cost. May not be a ready buyer for an asset that is very valuable to an organization. Is that asset worth nothing?

Discuss Future Profits

The worth of an asset is its potential contribution to future profits. Especially true for assets not readily available on the market. Subjective estimates.

Discuss Replacement Cost

How much would it cost to replace the asset? Subjective Estimate. Some assets easy to determine like current supplies. Others more difficult like property and equipment.

Which Method Is Correct? Depends on the question.

Discuss Valuation of Liabilities

Easier than asset valuation. Typically what you expect to pay. -None monetary obligations valued as the amount received.

Discuss Valuation of Net Assets

What’s left over. -Residual that makes accounting equation balance. Assets - Liabilities Publicly traded organization -Market value of organization’s stock.

Questions??

WHAT’S DUE THIS WEEK??? DISCUSSION BOARD ASSIGNMENT EXAM

Have a great night!!!