Financial Statements for Health Care Providers | Not for Profit Accounting | CPA Exam FAR
Table of Contents
- Hello and welcome to the session this is Professor Farhad in this session we're...
- Investors for example health HealthSouth is a private private hospital...
- Okay and these are the numbers again on the balance sheet nothing that's unusual...
- Restriction 19 thousand 125 okay now the statement of operation which is the...
- Like for example the function is nursing services you would have salaries and...
- Fifty one thousand five fifty net asset released from restriction used and...
00:00
hello and welcome to the session this is
Professor Farhad in this session we're
going to be looking at financial
statements for healthcare providers such
as hospitals this topic is covered in
the governmental and not-for-profit
accounting as well as the CPA exam as
always I would like to remind you to
connect with me on LinkedIn YouTube is
where you would need to subscribe I have
over 1500 plus accounting tax and
auditing lectures you wanna make sure
you subscribe you like my lectures share
them put them in the playlist let the
world know about them if you benefit
from my lectures that mean other people
00:30
might benefit as well please share them
this is my Instagram account this is my
Facebook account and this is my website
and one on my website if you'd like to
support the channel you could always
donate also on my website I do offer
special for my students right now Becker
CPA Review is offering $1,000 off this
is for the four parts of the CPA exam
now Beck and author unlimited access of
your studying for your CPA exam or
you're planning to study in the future
it says this has unlimited access you
01:01
can start studying today also if you are
a college student what you can do is
supplement your college studies with a
Becker CPA with thousands of
multiple-choice questions
and hundreds of hours by Becker faculty
so today we're gonna talk about
financial statements we have to
understand that we have three types of
healthcare providers we have government
owned by county or city government or VA
hospital Veterans Hospital that's one
type of hospitals we have privately
owned hospital those are owned by
01:32
investors for example health HealthSouth
is a private private hospital
and we have non-governmental nonprofit
hospitals usually they are religious but
they don't have to be like university of
10 or UPenn in philadelphia that's
considered a non-profit for the
financial statements they prepare the
following financial statements a balance
sheet what a financial statement of
financial position statement of
operations known we know it by the
income statement statement of cash flows
statement of functional expenses and
02:03
statement of changes in net asset
basically the changes in
basically net asset is equity now for
internal purposes various sponsor for
purposes of internal accounting as I
mentioned a second earlier you could
have funds you can have funds with donor
restrictions fund without donor
description so you can have an operating
fund with download or no donor
restriction this is where you have your
financial resources account for that as
well as property plant and equipment for
fund with donor restriction this is
where you have your donated resources
02:33
for a particular purpose program service
replacement of assets any asset that's
donated for a particular purpose that's
restricted term endowment fund annuity
funds life income life income funds this
is what you'd have under the donor
restriction bear in mind that board
designated resources are not part of the
restricted funds and this is first the
balance sheet or the statement of
financial position nothing
earth-shattering you should be all
familiar with this basically current
assets current assets with our current
03:04
assets we also have property plant and
equipment so we have current assets we
have asset long term investments
property plant and equipment then we
have total assets now we have
liabilities again we have current
liabilities long-term liabilities okay
then under net asset just because this
is a not-for-profit organization you
have without net asset without donor
restriction and that asset with donor
restructure so you have without donor
restriction and with donor destruction
03:36
okay and these are the numbers again on
the balance sheet nothing that's unusual
typically a evaluation that you should
be familiar with let's take a look at
the income statement or we don't call
the income statement we call them and we
call it statement of operation on the
statement of operation you're gonna have
obviously revenues and you're gonna have
expenses now you could show it all in
one line or you could show two columns
which is with the owner restriction
without owner a surgeon would look at a
sample but basically we have revenues
operating revenues and what were
typically operating revenues include
04:06
they would include fees from residents
fees from non-residents net asset
released from restriction used for
operation so basically the word they
were restricted some assets were
restricted now they are the left
restriction in game
to the came to be came to be not
restricted therefore their part of
income now expenses we have salaries
medical supplies and drugs insurance so
typically under operating we have
patient travel under under this under
this section II we have patient revenue
04:37
nursing services professional fees ok we
can hold we could also have other income
under other income we could have we
could have contribution without all the
restriction this is not part of
operating we could have investment
income so we could have operating
revenue and none operating revenue or
income okay for example here under non
operating we could have educational
expenses of the MD if the hospital has a
university if they charge fees for
parking lot and other and other services
05:09
as well now pay miscellaneous services
let's see under expenses we could have
you know insurance expense depreciation
interest so on and so forth or the
income statement could be shown this way
without dollar restriction with no
restriction basically to column and
notice all the expenses are under
without owner restriction there is no
expenses under with dollar research
restriction and we talked about this
when we talked about not-for-profit in
general and notice also here we have a
line for net asset released from
restriction net asset released from
05:38
restriction 19 thousand 125 okay now the
statement of operation which is the
income statement revenue without dollar
are divided into at least two categories
pay patient care revenue and they
include routine services other nursing
services professional services or other
revenue such as contribution that are
that are not not restricted by donors
educational services miscellaneous
resources and we could also have revenue
from capitation fees that also should be
listed separately should be listed
separately okay
06:10
the expenses expenses are reported
exclusively within without donor
category restriction and I showed you
this it's all the expenses are under do
without donor restriction that's why
they become
unrestricted and this is where we have
the expenses expenses can be classified
by function or by object if they are
classified by object then the functional
classification must be presented in the
know
okay so the statement of operation must
also indicate net asset released from
restriction in any transfer between
funds and we saw this net asset released
06:40
from restriction for example this line
here that asset released from
restriction will be reported separately
how much net asset released from
restriction that occurred this period so
went from unrestricted from not
restricted from restricted to not
restricted okay let's take a look maybe
at a let's take a look at and a
functional expense statement let me just
see what it looks like think I have one
for you and this is what it would look
07:13
like for example the function is nursing
services you would have salaries and
wages other professional services
employee benefit the general services
and physical services administrative
services will have under purchases bad
that is basically bad bad depreciation
as depreciation this is this is
basically likely functional and natural
classification of expenses include the
fallen the services what they could
include also you have a statement of
changes in that asset which is that
changes in equity and this section shows
you what happened that the changes in
07:44
the increase or decrease without owner
restriction and increase and decrease
with restricted net asset increase or
decrease by restricted by dollar so
under without on the restriction you're
gonna have basically not asset released
from restriction and income so net
income whoops
so under this category you will have net
income or operating income Chi 327 420
let me show you with there's number
coming from this is coming from thee
08:15
from the income statement let me just
erase everything here so this number 327
is this number minus nineteen thousand
125 let me show you how he came up with
this number
so this way you see so 343 46 545 - 19
08:51
thousand 125 its 327 240 therefore you
would you would list on the changes and
net asset what I'm trying to show you is
you would list on the changes of net
asset the net asset released from
restrictions separately from that income
but together they represent the changes
increase or decrease and assets without
donor destruction then net asset with
donor restriction you have contribution
restricted for a specific purpose
thirty thousand six hundred those are
with donor restriction so the
contribution restricted in perpetuity
09:22
fifty one thousand five fifty net asset
released from restriction used and
operations so this one will release them
and we use their an operation that asset
released from restriction Louis this one
up here for the purchase of the
equipment now the net asset released
from restriction to operation this went
up here with the expenses that went here
then we have investment income which we
saw investment income so increase in net
asset by restricted by dollar a sixty
four thousand two sixty together this
increase plus this increase equal to
09:54
this increase for ten eight oh five plus
the beginning balance equal to the
ending balance this one million five
hundred sixty six thousand should be
your balance sheet account let's go
there and there is this balance sheet
account right here 1 million five
hundred sixty six thousand seven twenty
what's left to discuss is the statement
of cash flow nothing or shattering about
the statement of cash flow you have
operating activities investing
activities and financing activities and
10:25
we are using here if you notice if you
look at this hopefully you know this we
are using the direct method now Phillies
are the direct method we reconcile up to
something quasi the indirect method
doesn't have to be the indirect method
but something similar for the indirect
method now if you don't know how to
prepare a cash flow statement please go
to my intermediate accounting
chapter well what chapter an
intermediate accounting
chapter xxiii and I have a detailed
explanation about the cash statement of
cash flow if you have any questions
10:56
about this topic please email me via
visit my website for additional lectures
please consider donating if you're
studying for your CPA exam as always
study hard that's worth it and see you
on the other side of success good luck