Question

. List the major functional areas in financial and managerial accounting in health care.
. Explain the role of the health information professional in the budgeting process.
. Explain the purpose of each budget type.
. Describe various cost allocations methods.

Answer 1

Functions of Managerial Accounting:

a) Profit analysis : Determining the level of profit margin that a health care industry is able to achieve from a specific medical equipment, medicine, patient or from its associates.

b) Constraint analysis: Analyzing the documents and operations of the health care industry in order to know the foremost bottlenecks in a company and what is their impact on the operation of health care industry.

c) Analysis of costing: Assisting in the bringing of new medical equipment by gathering its costs, comparing them to targeted cost levels and passing this information to management.

d) Inventory valuation: Deciding the direct costs of inventory items as well as allocating overhead costs to these items.

e) Capital budgeting analysis : Inspecting the various requirements to acquire fixed assets, it is the function of managers to determine if fixed assets are needed and what would be the right finance to acquire them.

Functions of Financial Accounting:

a) Analysis of accounting transactions: The main functionality of financial accounting is concerned with the proper recording and reporting of accounting transactions in compliance with various accounting standards. The function of a financial accountant is to produce financial statements on the results of entire operation of a hospital.

b) Timely analysis: Financial accounting focuses on the presentation of financial statements at the end of an accounting period. It does not report frequently.

c) Proper Valuation : Financial accounting is concerned with the proper valuation of assets and liabilities.

2. Health information professionals play a vital role in the budgeting process. They help their organizations avoid penalty meet compliance, ensure proper reimbursement and help patients to gain a better experience. The roles of health information professionals include billing management for hospitals and health care systems, revenue-generation data analysis, auditing and billing for accuracy and compliance. The major role of health information professionals is to manage information and ensure data integrity throughout the healthcare industry.

3. The following are the purposes of each budget type :

Master Budget: The purpose of master budget is to present a comprehensive picture of a company's financial activity. It includes a combination of factors like sales, operating expenses, assets and income sources that allow companies to set goals and evaluate their total performance.

Operating Budget: Operating budget is used to forecast and analyze the projected income and expenses over a period of time. Operating budget is related with sales, production, labor costs, material costs, administrative costs and overhead costs in order to get an accurate financial statement.

Cash Flow Budget: It helps in projecting how and when cash comes in and flows out of a business. It helps a company to manage its cash wisely.

Financial Budget: It helps a company in managing its assets, cash flow, income and expenses. A financial budget is used to assess a company's financial health and presents a detailed overview of its spending and revenue throughout its operation.