Assignment: Finance Contexts
generally accepted accounting principles used for stan- dardization. The 1996 AICPA Audit and Accounting Guide for Health Care Organizations (AICPA 1996) established four basic financial statements that hospitals should prepare for external users:
1. A consolidated balance sheet
2. A statement of operations
3. A statement of changes in equity
4. A statement of cash flows
The primary purpose of managerial accounting is to provide accounting informa- tion, generally current or prospective in nature, to internal users, including managers. Such accounting information supports the planning and control management functions. In this way, managerial accounting is the link between financial accounting and the manager. Managerial accounting, or accounting information prepared for internal use, requires no prescribed format and therefore varies greatly among organizations. Managerial accounting
CRITICAL CONCEPTS Measurements
•➤ Average daily census:➤The➤average➤number➤of➤inpatients,➤excluding➤newborns,➤
•➤ Average length of stay (ALOS):➤Derived➤by➤dividing➤the➤number➤of➤inpatient➤days➤
•➤ Occupancy rate:➤The➤ratio➤of➤average➤daily➤census➤to➤the➤average➤number➤of➤
00_Nowicki (2339) Book.indb 6 5/17/17 10:57 AM
C h a p t e r ➤ 1 : ➤ F i n a n c i a l ➤ M a n a g e m e n t ➤ i n ➤ C o n t e x t 7
topics such as budgeting and inventory control require knowledge of economics, statistics, and operations research.
Many managerial accountants believe that cost accounting—the study of costs, including methods for classifying, allocating, and identifying costs—is either synonymous with or a subset of managerial accounting. Others argue that cost accounting includes all managerial accounting and also requires some financial accounting. Cost accounting and managerial accounting also include topics that could be considered finance.
Historically, the purpose of finance has been to borrow and invest the funds necessary for the organization to accomplish its purpose. Today, the purpose of finance is to analyze the information provided by managerial accounting to evaluate past decisions and make sound assessments regarding the future of the organization (Finkler 2003). Finance uses techniques such as ratio analysis and capital analysis and requires knowledge of financial and managerial accounting (see appendix 1.1), economics (see appendix 1.2), statistics (see appendix 1.3), and operations research. Exhibit 1.1 shows the relationship of finance to the aforementioned supporting disciplines.
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