Part II: Record Financial Operations CHAPTER 5: EXPENSES: (OUTFLOW)
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Transcript of Part II: Record Financial Operations CHAPTER 5: EXPENSES: (OUTFLOW)
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Part II: Record Financial Operations
CHAPTER 5:
EXPENSES: (OUTFLOW)
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Overview: The Distinction Between Expense and Cost
Expenses are expired costs that have been used up, or consumed, while carrying on business.
Expense in the broadest sense includes every expired (used up) cost that is deductible from revenue.
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Overview: The Distinction Between Expense and Cost
“Cost” is the amount of cash expended* in consideration of goods or services received (or to be received).
* (or property transferred, services performed, or liability incurred)
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Costs can either be expired or unexpired.
Expired costs are used up in the current period and are matched against current revenues.
Unexpired costs are not yet used up and will be matched against future revenues.
Overview: The Distinction Between Expense and Cost
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Disbursements for Services
Disbursements for services represent an expense stream (an outflow)
Disbursements for services can trigger payment either:
when the expense is incurred; orafter the expense is incurred.
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Disbursements for ServicesPayment when the expense is incurred does not require the expense to enter the Accounts Payable account.
Payment after the expense is incurred requires the expense to be recorded in the Accounts Payable account. It is then cleared from Accounts Payable when payment is made.
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Grouping Expenses for Planning and Control
Grouping by Cost Center — One form of responsibility center.
Grouping by Diagnoses and Procedure — Beneficial because is matched costs and common classifications of revenues.
Study chapter examples.
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Grouping Expenses for Planning and Control
Study chapter examples.
By care settings recognizes different sites where service is delivered;
By service lines would be used for grouping costs if revenues were divided by service line.
Grouping by Care Settings and
Service Lines
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Grouping Expenses for Planning and Control
Grouping by Programs
Distinguishes projects that posses their own objectives, funding, and indicators.
Study chapter examples.
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Cost Reports As Influencers Of Expense Formats
Since the mid-1960s Annual Cost Reports are required by the Medicare Program and the Medicaid Program.
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Cost Reports As Influencers Of Expense Formats
The arrangement of costs into “Cost Centers” (on the cost report) has strongly influenced the arrangement of expense line items in many health care
information systems.
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Grouping Expenses byCost Center: Example
Cost centers are one method of grouping expenses. For example, a nursing home may consider the Admitting Department as a cost center. In that case the expenses grouped under the Admitting Department may include:
• Administrative and Clerical Salaries• Admitting Supplies• Dues• Periodicals and Books• Employee Education• Purchased Maintenance
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Grouping Expenses byCost Center: Practice
Drugs Requisitioned
Pathology Supplies
Detergents and Bleach
Nursing Salaries
Clerical Salaries
Uniforms (for Laundry Aides)
Repairs (parts for microscopes)
The Metropolis Health System groups expenses for the Intensive Care Unit into its owncost center. Lab. and Laundry expenses are likewise grouped into their own cost centers.Required:1. Setup a worksheet with columns across the top for three cost centers: Intensive Care Unit;Lab. And Laundry. 2. Indicate the appropriate cost center for each of the following expenses:
Laundry
X
X
X
Laboratory
X
X
X
Intensive
Care Unit
X
X
X
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Grouping Expenses byCost Center:Assignment
The Metropolis Health System’s Rehabilitation and Wellness Center offers outpatient therapy and return-to-work services plus cardiac and pulmonary rehabilitation to get people back to a normal way of living. The Rehabilitation and Wellness Center expenses include the following:
Nursing Salaries
Physical Therapist Salaries
Occupational Therapist Salaries
Cardiac Rehab Salaries
Pulmonary Rehab Salaries
Patient Education Coordinator Salary
Nursing Supplies
Physical Therapist Supplies
Occupational Therapist Supplies
Cardiac Rehab Supplies
Pulmonary Rehab Supplies
Training Supplies
Clerical Office Supplies
Employee Education
Administrative/Clerical salaries
Administrative
X
X
Training
X
X
X
Cardiac
Pulmonary
X
X
X
X
X
X
X
Physical/Occupational
Therapy Rehab
X
X
X
X
X
X
X