Governmental and not-for-profit accounting solution of c14.doc

Chapter 14 Health Care Providers Questions for Review and Discussion Although both government and not-for-profit health care organizations are accounted for similarly, there are also significant differences. Not-for-profit hospitals have to follow the provisions of FASB Statement No. 117 as to the form and content of their financial statements. Hence the balance sheet of a not-for-profit hospital, but not that of a government hospital, must display the three categories of donor restrictiveness. Similarly, the statement of changes in net asset must indicate the amount of resources released from restriction and the statement of cash flow must be divided into three categories of receipts and disbursements (operations, financing and investing) rather than the four required of governments (operations, capital financing, noncapital financing and investing). The major revenues of health care orgnaizations are divided into at least two classifications, patient care revenues and other revenues. Patient care revenues include routine services, other nursing services, and professional services. Other revenues include contributions, educational services, and miscellaneous sources. The major expenses are typically classified either by function or object. Healthcare organization expenses include salaries and wages, employee benefits, fees to individuals and organizations, supplies and other expenses, purchased services, bad debts, depreciation, and interest. Per statement No. 117, expenses may be classified either by function or by object. If the expenses are classified by object, then the functional classification must be presented in the notes.  Per statement No. 117, expenses may be classified either by function or by object. The statement of functional expenses is required for voluntary health and welfare organizations. Most of these organizations are not-for-profit, and non-government supported. Their major source of revenues is from contributions. In reporting