Health Care Accounting Interview Process

Health Care Accounting Interview Process

Part 1: Financial Document Data Knowledge

What are the 4 main financial statements, what’s on them, and what they are used for?

The four main financial statements include the balance sheet, the income statement, the cash flow statement, and the statement of owner’s equity. The balance sheet offers insight into an organization’s financial position regarding assets, liabilities, and equity. Also, the balance sheet information calculates essential financial ratios for financial analysis. Second, the income statement provides a picture of an organization’s performance over a given period regarding revenue and expenditure. It is used to evaluate the profitability of a business. Third, the cash flow statement gives users an understanding of an organization’s cash management. The statement evaluates whether a company has sufficient cash to meet obligations. Lastly, the owner’s equity statement shows an organization’s retained earnings. It evaluates a business’s ability to reinvest or pay off debts.

How does the data flow from the transaction (e.g. MRI scan) to financial statements? Use the following key terms in your response: transaction, journal entry, general ledger, financial statement.

When a transaction occurs, it is entered into the books of account of a business through a debit or credit. The credit or debit entries are called journal entries, which entail recording journal transactions accordingly. Each journal entry is contained in the general ledger, whereby all transactions recorded are closed and balanced for a specific period. The balances from the general ledger are then transferred to the trial balance, which is used to prepare financial statements. The balance sheet and income statement are two primary financial statements prepared based on the trial balance information.

In the healthcare industry, who are some of the key internal and external users of financial statements? What are the main day-to-day business decisions made by using financial statements (e.g., eligibility for an external loan)?

Major internal users of financial statements include the management and employees. Managers use financial statements to assess the organization’s performance and identify areas where emphasis is required. On the other hand, employees consider information from the financial statements to understand the organization’s health and meet their needs. From the external environment, the government is a major user of financial statements, and it needs to assess the organization for tax purposes. Investors also form part of external users who use financial statements to understand whether the organization is a good destination for their money (Weygandt et al., 2020). Some of the major day-to-day business decisions made using financial statements include borrowing, investment, and liquidity.

Part 2: Financial

Financial document line item	Corresponding $ amount on the consolidated financial statement (use the 2021 column)	Example included in each line item
Example: Supplies	$968,544	Medical supplies, pharmaceutical expenses
Cash and cash equivalents	$407,044	Payments made in cash, receivable notes
Patient accounts receivables	$764,948	Services provided to patients in advance
Prepaid expenses	$133,328	Electricity bills paid in advance
Accounts payable and accrued liabilities	$609,021	Water bills yet to be paid
Property and equipment	$3,619,451	Purchase of medical machinery
Long-term debt	$2,135,075	Loans from the bank to be paid in more than a year period
Net patient service revenue	$6,052,048	Payments received for medical services
Salaries and benefits	$49,496	Wages paid to workers
Depreciation and amortization	$289,263	Wear and tear of medical equipment
Interest and investment income	$47,822	Interest accrued on money deposited in a bank

References

Weygandt, J. J., Kimmel, P. D., & Aly, I. M. (2020). Managerial Accounting: Tools for Business Decision-Making. John Wiley & Sons.

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You are applying for a health care manager position that reports to a department head of a hospital. As part of this role, you may be responsible for pulling key financial data for the department head and completing some simple financial analysis. As part of the interview process, the recruiter wants to ensure your familiarity with financial documents and the data they contain.

Explain the fundamental concepts of accounting in the healthcare environment and showcase your knowledge of accounting.

Why Conduct Financial Audits?