1. Workshop Financial Prescription for Doctors 7TH October, 2012CA.(Dr.) Alok shah Partner Contractor, Nayak & Kishnadwala1

2. 2 3. ACCOUNTING PROCESSReceipts & incomeExpenses3 4. Books of account and other documents to be kept and maintained under section 44AA(3) The books of account and other documents referred to in sub-rule (1) shall be the following, namely: (i) a cash book; (ii) a journal, if the accounts are maintained according to the mercantile system of accounting; (iii) a ledger; (iv) carbon copies of bills, whether machine numbered or otherwise serially numbered, wherever such bills are issued by the person, and carbon copies or counterfoils of machine numbered or otherwise serially numbered receipts issued by him [ not apply to sum exceeding Rs 25] (v) original bills wherever issued to the person and receipts in respect of expenditure incurred by the person or, where such bills and receipts are not issued and the expenditure incurred does not exceed fifty rupees, payment vouchers prepared and signed by the person: [Provided that the requirements as to the preparation and signing of payment vouchers shall not apply in a case where the cash book maintained by the person contains adequate particulars in respect of the expenditure incurred by him.]4 5. ACCOUNTING BOOKS TO BE MAINTAINED MANDATORYBOOKS THAT A MEDICAL PRACTISIONER HAS TO MAINTAIN.: 1. Cash book, 2. Bank book (Bank statements), 3. Daily case(Patient) register, 4. Detailed Salary register, 5. Medicine stock register, 6. Grants and Donations receipt register, 7. Expenses register,8. Every Books which are necessary to give true and fairview of the state of affairs of the medical professionals. 5 6. Books that a medical venture has to maintain:Cash book : Cash Book" means a record of all cash receipts and payments, kept and maintained from day-to-day and giving the cash balance in hand at the end of each day or at the end of a specified period not exceeding a [month];6 7. Types of cashbook Simple Cash Book Petty cash book7 8. 2. BANK BOOK Bank book is a statement showing all thetransaction routed via bank : Bank book consist all the transaction details like amount, instrument number, payee, date etc.8 9. Form of Daily case register according to income tax act: (proforma)9 10. Detailed salary register10 11. Medicine stock register Track your stocksTracking of this removes unnecessary costsResults in enabling to know exact profit position 11 12. Grants and Donations receipt register If the Hospital having great funding from out sidesources through grants & Donations it is better to have a register to record all such stuff.12 13. It is a great part of the internal control that all the commercial non commercial practice want to under control 13 14. Records OTHERRECORDS THAT ARE REQUIRED TO BE MAINTAINED: 1. Separate book showing foreign and domestic contributions, 2. Equipment register, 3. Duties and taxes register, 4. Professional fees register, 5. TPA contract register, 6. Honorarium received-paid register, 7. Details of the services rendered by volunteers for which no payment has been made, 8. Segment details (own pharmacy, lab ect.) .14 15. Every Books which are necessary to give of the state of affairs of the medical professionals.15 16. 16 17. Possible medical practices 1.2. 3. 4. 5. 6.SOLE PROPRIETORY (Mostly Clinic) PARTNERSHIP LLP TRUST PRIVATE LIMITED COMPANY PUBLIC LIMITED COMPANY17 18. Medical practices1. This is a best option for the physician who desires adegree of management and fiscal control over the medical practice. Some hospitals provide an income guarantee and support to help a new physician set up a practice.18 19. Medical practices2. Partnerships offer more freedom for business ownerswith shared business tasks and the potential to earn greater profits. It is simple to set up a partnership because no legal documents are needed. Partnerships are often an oral agreement between two or more parties. Potential problems can be averted down the road by drawing up a legal partnership agreement. 19 20. 3.LIMITED LIABILITY PARTNERSHIP(LLPA Limited Liability Partnership (LLP) is a partnership in which some or all partners have limited liability. one partner is not responsible or liable for another partner's misconduct or negligence. This is an important difference from that of an unlimited partnership.20 21. Creating A Winning Business Partnership Have The Same Vision Define Business Roles Avoid the 50-50 Split Hold A Monthly Partner Meeting Create A Partnership Agreement21 22. 4.Medical trustTrust are the establishment which are established under Indian trust act, 1882 Every Person capable of holding property may be a trustee; but, where the trust involves the exercise of discretion, he cannot execute it unless he is competent to contract. 22 23. PRIVATE LIMITED COMPANY For incorporating a private limitedcompany : 1. 2. 3. 4. 5. 6.A minimum of two directors are required and minimum two shareholders. The right to transfer shares is restricted as per the articles of association. The number of shareholders is limited to fifty. An invitation to the public to subscribe to any shares or debentures is prohibited. No invitation or acceptance of deposits from persons other than members, directors or their relatives is allowed. Lesser number of compliance requirements 23 24. PUBLIC LIMITED COMPANY The company has a separate legal existence apart fromits members who compose it. Its formation, working and its winding up, in fact, all its activities are strictly governed by laws, rules and regulations. The Indian Companies Act, 1956contains the provisions regarding the legal formalities for setting up of a public limited company.24 25. A company must have a minimum of seven members butthere is no limit as regards the maximum number. The liability of a member of a company is limited to the face value of the shares he owns. As a company is an independent legal person, its existence is not affected by the death, retirement or insolvency of any of its shareholders.25 26. COMPANIES MAY BE IN FOLLOWING SPECIALITIESSINGLE-SPECIALTY : One specialty is represented among physicians whohave agreed to be in practice of any one service exclusively.26 27. MULTI- SPECIALTY : Multi specialty business not just carries multiple medicalservices but also specializes in all of the elected services which they have opted for. As name says MULTI , it can have multiple departments as well as multiple facilities can also be provided by the aforesaid hospitals.27 28. Allied Health profession Generally allied Health profession indicate that theyare health professions distinct from medicine, dentistry, optometry and nursing. Allied Health professional are not typical a professional so called doctors. But they are much benefiter to a medical professional & and supplementary service providers.28 29. SOME EXAMPLES OF ALIIED MEDICAL SERVICES: Clinical officer: Diagnostic medical sonographist: Dietitian / Nutritionist: Dialysis Technologist / therapist: Health coach: Radiation therapist: Orthoptist: Pharmacist Massage therapist Music therapist Etc,etc. 29 30. 30 31. CASH VS. ACCRUAL ACCOUNTING There are basically two methods of accounting expenses and income. One is cash basis and the other is accrual. The difference between the two is basically time. With the cash system you only account for an expense or earning when you actually get the money or pay it not when you accrue the sale or expense.31 32. This can get inaccurate when you arepaying with credit or other ways to prolong the payment or if you use a collection service to do your accounts receivable you only count income when it actually hits your account not when you have done the service or given the product.32 33. THEN WHY CASH FOR DOCTORS ? There are two types of businesses that benefit from a cash system that is Doctors who don't always get paid for their services and Agricultural businesses like ranchers or farmers who don't always bring inthe revenue do to weather or other unforeseeable events. These two businesses would do well to talk to an accountant about the best method of accounting for their particular business type.33 34. Efficient working capital management allows hospitals to reduce their holdings of current assets, such as inventory and accounts receivable, which earn no interest income and require financing with shortterm debt. The resulting cash inflows can be reinvested in interest-bearing financial instruments or used to reduce short-term borrowing, thus improving the profitability of the organization.34 35. Internal control Internal Control is defined as a process affected by an organization's structure, work and authority flows, people and management information systems, designed to help the organization accomplish specific goals or objectives.35 36. INTERNAL CONTROL IN CASHHOW TO Access to funds must be limited to specific person Identify custodians All adjustments must be documented and approved Transfers of funds must be documented Funds collected must be balanced Funds must be deposited in a timely Manner Deposits must be reconciled 36 37. INTERNAL CONTROL IN CASHHOW TO When funds are initially received, the event must bedocumented in one of the following ways: 1. Mail logs 2. Cash receipt slips 3. Cash registers 4. Credit card foils37 38. BY : CA.(Dr.) ALOK B. SHAH CONTRACTOR,NAYAK & KISHNADWALA, CHARTERED ACCOUNTANTS 38