Book chapter
Understanding Financial Statements
The Complete Business Guide for a Successful Medical Practice, pp.89-95
Springer International Publishing
10/25/2014
DOI: 10.1007/978-3-319-11095-0_7
Abstract
Financial accounting is the branch of accounting concerned with the preparation of financial statements. There are four primary financial statements: the Balance Sheet, Income Statement, Cash Flow Statement, and Statement of Retained Earnings. These reports are used collectively to assess the financial position of a business.
In order to understand these financial statements, one must understand the difference between accounting on a cash basis vs. accounting on an accrual basis. In the cash method of accounting, revenue is recorded when cash is received and expenses are recorded when cash is paid. Conversely, under an accrual method of accounting, revenue is recognized when it is earned and expenses or deductions are recognized when they are incurred. As a way of illustrating the difference, let us consider a practitioner in a urology clinic. Let us say that 35 patients are seen in one day and 5 of them undergo cystoscopy. Under a cash method of accounting, the revenue from the 35 patients and the cystoscopy procedures would only be recorded once the bills had been paid by the patient or insurance company. This might be weeks or months in the future.
Details
- Title: Subtitle
- Understanding Financial Statements
- Creators
- Karl J. Kreder - University of Iowa
- Resource Type
- Book chapter
- Publication Details
- The Complete Business Guide for a Successful Medical Practice, pp.89-95
- Publisher
- Springer International Publishing; Cham
- DOI
- 10.1007/978-3-319-11095-0_7
- Language
- English
- Date published
- 10/25/2014
- Academic Unit
- Obstetrics and Gynecology; Urology
- Record Identifier
- 9984384732502771
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