PRACTICE FINANCES

1. PRACTICE FINANCES Chapter 10

2. Practice Finances • Learning Objectives • Define five accounting terms related to the responsibilities of the administrative medical assistant. • Demonstrate an understanding of accounting principles by explaining the procedures for maintaining two of the essential financial records. • List three banking duties of the assistant. • List the duties of the assistant related to the payroll process. • Explain how an employee’s net salary is determined. Chapter 10

3. Absolute accuracy Accounting Accounts payable Accounts receivable Accrual method Aging reports Annual summary Audit Balance sheet Bank reconciliation Blank endorsement Bookkeeping Cash basis Charge/receipt slips Check Daily journal Deductions Deposits Direct earnings EFT Key Terms Chapter 10

4. Employer identification number (EIN) E-signature FICA Full endorsement FUTA Indirect earnings Interest Monthly summary Patient ledger cards Payroll Pegboard accounting Petty cash fund Posting Practice analysis report Procedure day sheet Restrictive endorsement Key Terms (cont’d) Chapter 10

5. Essential Financial Records • Accounting • Methodical recording, classifying, and summarizing of business transactions • Bookkeeping • Accurate recording of transactions Chapter 10

6. Essential Financial Records (cont’d) • Cash basis • Expenses are recorded when actually paid • Income not recorded until payment is actually received • Accrual basis • Income is recorded when earned • Expenses are recorded when incurred Chapter 10

7. Daily journal Also called general journal or day sheet Charge/receipt slips Record of physician’s services andcharges Ledgers Patient ledger cards Accounts receivable ledger Accounts payable ledger Summaries Monthly summary Annual summary Balance sheet Essential Financial Records (cont’d) Day Sheet ROA 45.00 99212 70.00 70120 120.00 99202 47.00 ROA 37.00 Chapter 10

8. Accounting Software • Specialized software for medical practices is available • Saves time by automating routine tasks • Accurately completes mathematical calculations Chapter 10

9. Daily Journal • For recording the daily fees charged and payments received • Accounts receivable • Cash receipts • Helps to keep control of amount of money owed to practice • Used to account for daily cash flow • Software, such as NDCMedisoft, provides an electronic daily journal Chapter 10

10. Bookkeeping Methods • Single-entry method • One entry for each transaction • Double-entry method • Uses debits and credits • Pegboard method • “Write it once” system • Multiple layers of forms Chapter 10

11. Summaries • Used to analyze charges, cash receipts, and disbursements • Compare current financial performance with past financial performance • Software easily manipulates databases to produce summaries • Practice analysis reports • Aging reports • Spreadsheet capabilities Chapter 10

12. Banking • Absolute accuracy • Promptness • Administrative medical assistant acts as physician’s agent Chapter 10

13. Interest bearing account Regular business checking account Negotiable checks Contain the specific amount to be paid Are properly completed Checks and Checking • Unacceptable checks • Postdated checks • Predated checks • Third-party checks • Checks with “paid-in-full” annotation when amount is not full amount Chapter 10

14. Endorsements • Blank endorsement • Payee signs name • Full endorsement • Payee signs name, company, bank, account number, etc. • Restrictive endorsement (safest) • Marked “For Deposit Only” • Payee signs name, company, bank, account number, etc. Chapter 10

15. Deposits Daily practice Cash flow management All cash and checks Complete and accurate deposit slips Bank receipts Security of checkbook and other banking materials Returned checks Incorrectly written checks Incomplete checks “Non-sufficient Funds” Deposits andReturned Checks Chapter 10

16. Bank Reconciliation • Statement balance is compared with checkbook balance • Compare canceled checks with items listed on statement • Compare checks listed on statement with checkbook to verify accuracy • Account for deductions such as service charges • Compare deposits against credits on bank statement • Record any interest earned • Complete the reconciliation form Chapter 10

17. Using software for Checking balances Receiving electronic deposits Finding out which checks have cleared Transferring money between accounts Paying bills Must still record all checks and deposits Must still reconcile statement E-signatures Same legal standing as written signatures Electronic funds transfer (EFT) Electronic Banking Chapter 10

18. Petty Cash • Small amounts of cash used for small expenses • Delivery charges, cab fares, postage stamps • Petty cash register or voucher • Provides record of small expenses • Ensures only authorized payments are made • Security • “Proving petty cash” Chapter 10

19. Payroll • Calculate the earnings of employees • Subtract taxes and other deductions • Create employee payroll records • Prepare the salary checks • Submit payroll taxes • Use current tax formulas and abide by IRS regulations Chapter 10

20. Payroll Records • Need for accurate records • Employer Identification Number (EIN) • Employee data • Identified by Social Security Number • Non-U.S. citizens must complete an Employment Eligibility Verification Form • Pay schedule • Type of payment—hourly or salaried • Employee-requested deductions Chapter 10

21. Payroll Taxes • Direct earnings • Salaries or wages paid to employees • Indirect earnings • Paid leave or specific employer-paid benefits • W-4 form • Employee’s allowances or exemptions Chapter 10

22. Payroll Taxes (cont’d) • FICA tax • Social security contributions • 2 separate deductions • 1 for Medicare • 1 for pension benefits • 1/2 paid by employee • 1/2 paid by employer • Contribution percentage changes yearly Chapter 10

23. Voluntary deductions Employer’s obligation Net earnings Calculating Payroll • Gross earnings • Exemptions and state and local deductions • FICA taxes • Unemployment taxes Chapter 10

24. Employer’s TaxResponsibilities • Federal Unemployment Tax Act (FUTA) • May also pay into state unemployment fund • Some states also require employee contributions • Taxes must be paid to the federal government monthly • Employers are required to file a quarterly tax return • For reporting federal income and FICA taxes Chapter 10

25. Records must, by law, be retained for 4 years Employee earnings records should contain: Net salary paid Income taxes withheld FICA, state, and local taxes deducted Other deductions Payroll Records • Employee’s name and SSN • Address • Number of exemptions • Gross salary earned Chapter 10

26. Electronic Payroll • Also called direct deposit • Employee’s net pay is automatically withdrawn from practice account, AND • Deposited into the employee’s account • Electronic Funds Transfer (EFT) • Loss or theft of paychecks is eliminated • Productivity is increased • Convenience of eliminating trips to the bank Chapter 10

27. Quiz • Another name for the daily journal is ___________. day sheet • _____ pay is the amount paid to the employee. Net restrictive • The _____________ endorsement is most often used by businesses. • FICA taxes are the responsibility of the employee. (T/F) False, both the employee and the employer must pay FICA taxes. Chapter 10

28. Critical Thinking • What is the difference between a cash basis and an accrual basis in accounting? With a cash basis, expenses are recorded when they are actually paid and income when payment is actually received. With an accrual basis, expenses are recorded when they are incurred and income when it is earned. Chapter 10