An Essential Aspect Of Healthcare Financial Management
An Essential Aspect Of Healthcare Financial Management For Any Medical
An essential aspect of healthcare financial management for any medical facility is the year-end closing. What are the primary accounts that must be addressed in the year-end closing process? List these accounts, and briefly describe the procedure for each. Your response must be at least 200 words in length. Berger, S. (2014).
Paper For Above instruction
The year-end closing process is a critical component of healthcare financial management, ensuring that the financial statements accurately reflect the financial position of the medical facility at the close of the fiscal year. The primary accounts that must be addressed include revenue accounts, expense accounts, asset accounts, liability accounts, and equity accounts. Each plays a vital role in providing a comprehensive view of the organization’s financial health.
Revenue accounts, such as patient service revenue, need to be reviewed and adjusted to account for accrued revenue and any uncollectible accounts. The process involves reconciling the patient accounts receivable ledger with the general ledger and making necessary adjusting entries to record uncollected bills and doubtful accounts. Expense accounts, including salaries, supplies, and administrative expenses, require closing for the period by transferring their balances to a temporary account, typically retained earnings, to reset their balances for the new fiscal year.
Asset accounts, such as cash, accounts receivable, and inventory, must be verified through reconciliation and physical counts where applicable. Adjustments are made to correct discrepancies and to account for depreciation of fixed assets, such as medical equipment and buildings. Liability accounts, including accounts payable, accrued expenses, and long-term debt, need to be reviewed for accuracy and properly classified. Adjustments are made to account for expenses incurred but not yet paid or recorded.
Finally, equity accounts, especially retained earnings, are updated to reflect the net income or loss for the year. This involves closing the income statement accounts into retained earnings, thereby updating the organization’s cumulative net worth. The year-end closing process is crucial for ensuring transparency, compliance, and accuracy in financial reporting, supporting informed decision-making for the upcoming fiscal year.
In conclusion, a structured approach to closing these primary accounts fosters sound financial management within healthcare organizations, enabling effective resource allocation and strategic planning. Proper execution of this process aligns with best practices outlined by Berger (2014) and contributes to financial stability and regulatory compliance within medical facilities.
References
- Berger, S. (2014). Fundamentals of health care financial management: A practical guide to fiscal issues and activities (4th ed.). San Francisco, CA: Jossey-Bass.