HCA 270 WEEK 2 Assignment Accounting Practices and Entries
HCA 270 WEEK 2 Assignment Accounting Practices and Entries fin571
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Date Created: 11/10/15
Accounting Practices 1 Accounting Practices and Entries YOUR NAME Axia College of University of Phoenix Accounting Practices 2 To the wise business owner the company is much like a human being Just as people make sure they see their doctors on regular basis to ensure their physical health so too business owners check the health of their business on a regular basis Accounting is defined as the process of identifying measuring and communicating economic information about an organization for the purpose of making decisions and informed judgments University of Phoenix 2009 There are three types of accounting this can be done by accrual cash ow and fund accounting We will discuss how entries are made under each type of accounting how each handles depreciation how inventory is accounted for the differences in the organizations that use each type and the strengths and weaknesses of each type In accrual accounting economic activities of financial events are considered because expenses and revenues are recognized Revenues are realized and earned whether or not they are received in cash Incurred expenses are matched to related revenues whether or not they are in fact paid in cash Standard income statements and balance sheets do not indicate the cash in ow and out ow of a company in accrual accounting it has a separate cash ow statement Accounting Methods 2009 Accounting Practices 3 The cash accounting method recognizes revenue when cash is paid out In cash accounting revenues and expenses are also called cash receipts and cash payments It does not accounts payable and receivable or prepaid or accrued expenses Accounting Methods 2009 Fund accounting serves any non profit organization or public domain such as hospitals clinics and public health departments They have a need for special reporting to financial statement users that show how money is spent rather than how much profit was earned A business manager in charge must be able to produce reports that detail expenditures and revenues for multiple funds and reports that summarize the financial activities Fund Accounting 2009 Depreciation is the process of matching the historical cost of an asset to expenses in the periods in which it is used It may be straight line taking equal amount of depreciation expenses in each year or accelerated taking greater amounts of depreciation in earlier years University of Phoenix 2009 Organizations that are subject to income taxation will not want to use straightline depreciation for incometax reporting Since depreciation is an expense that is deducted from the net income they can lower their tax bills by increasing their Accounting Practices 4 annual depreciation expense University of Phoenix 2009 So to sum it up accrual accounting will not want to use straightline depreciation while it would use in cash accounting Fund accounting does not show depreciation since they are non profit organizations Inventory consists of goods purchased or made and held for resale Organizations may select whether to use FIFO First in First Out or LIFO Last in First Out for inventory valuation It affects not only the value of inventory reported on the balance sheet but also the cost of goods sold an expense that affects net income LIFO is the method best used for accrual accounting because it produces lower inventory values and higher costs of goods sold and is best for organizations subject to income taxation University of Phoenix 2009 FIFO and LIFO are irrelevant in cash accounting but I believe FIFO is more relevant in fund accounting to ensure accuracy of expenses There are advantages and disadvantages for each type of accounting Accrual accounting is far more costly because it requires the bookkeeper to record many more transactions Companies who have extended credit are advised to use accrual accounting Cash accounting is favored for tax purposes since it defers tax Accounting Practices 5 burdens until the cash is received It is often used by small business and organizations that are not required to use accrual accounting Cash accounting is not considered to provide a true and fair view of the financial performance Accounting Methods 2009 The use and efficiency of fund accounting has been a topic of debate in the accounting profession whom questions its usefulness but the ways in which the organizations operate make it a useful system for financial reporting Fund Accounting 2009 Accounting is the basis for a company s survival in making sure the finances are in line and being spent properly The organization s choice of each type of accounting is what works best for the particular needs Accrual cash ow and fund accounting were all discussed and determined their method of entries depreciation inventory and their advantages and disadvantages Each organization can decide what is right for them References Axia College of University of Phoenix 2009 Introduction to Health Care and Finance Retrived June 26 2009 from Axia College Week One Reading aXcess HCA 270Financila Matters for Health Care Professionals Wikipedia 2009 Accounting Methods Retrieved June 26 2009 from httpenwikipediaorgWikiAccountingMethods Wikipedia 2009 Fund Accounting Retrieved June 26 2009 from httDenwikipediaorgWikiFundAccounting httpWWWbrainmasscom httpenwikipediaorg httpWWWreferencecom httpwwwtermnanerslabcom httpadrnissionsuwaedu httpsmallbusinesscom httpDeernanerscom
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