Questions and Answers
What is the difference between the cash basis and the accrual basis of accounting?
Cash basis: enters income when payment is received, accrual basis: entered at the time of sale even if they have not yet been paid.
What generates income in the medical office?
Charging patients for services and receiving patient payments.
What are three types of financial records used in a bookkeeping system?
Single entry bookkeeping, double entry bookkeeping, and pegboard system.
If patient charges are recorded using a computer billing program, where must the data about the charge be entered?
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Why does a charge slip usually contain diagnosis and procedure codes?
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How does the medical assistant know what to charge a patient for a specific procedure?
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How is information arranged in the patient account ledger?
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What are four ways that payments are made to a patient account?
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What is the difference between a credit adjustment and a debit adjustment?
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When an insurance company pays an amount that is lower than the usual charge, how is the patient's balance due returned to zero?
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What information is recorded on a day sheet?
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What does it mean to 'close the day' and why is this important for accurate financial record keeping?
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Describe three types of bank accounts.
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Describe the services and function of a checking account.
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What is the advantage of maintaining a savings account or money market account compared with a checking account?
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Differentiate between a cashier's check and a certified check.
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What is the MICR line on a check and what information does it contain?
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What should the medical assistant do if he or she writes a check incorrectly?
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If a medical office accepts credit or debit cards, what policies should be in place?
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What are common precautions for accepting checks in the medical office?
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How is the cash drawer balanced at the end of the day?
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What is necessary before a check can be cashed or deposited?
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What is special endorsement?
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Identify five reasons why the monthly bank statement may not agree with the medical office's calculation of the bank balance in a checking account.
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What financial accounts does a medical office usually have and what do those accounts include?
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How is a petty cash fund managed?
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What is the function of the day sheet of a bookkeeping system?
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What is the function of the ledger?
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Who determines the level of service or procedures provided to the patient?
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Example of a debit adjustment.
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Example of a credit adjustment.
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What precautions should be taken when accepting credit cards?
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What is restrictive endorsement?
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What is a copay?
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Study Notes
Accounting Methods
- Cash basis accounting recognizes income only when payments are received, while accrual basis records income at the time of sale, regardless of payment status.
Income Generation in Medical Offices
- Revenue is generated by charging patients for services rendered and collecting patient payments.
Financial Record Types
- Three main bookkeeping systems:
- Single entry bookkeeping
- Double entry bookkeeping
- Pegboard system
Charge Data Entry
- In a computer billing program, patient charges are automatically posted to both the daily journal and the patient's account upon entry.
Charge Slips Purpose
- Include diagnosis and procedure codes primarily for billing and insurance claims.
Determining Charges
- Charges for specific procedures are derived from a predetermined fee schedule.
Patient Account Ledger
- Transactions in the patient account ledger are organized chronologically.
Payment Methods
- Accepted payment forms include cash, checks, credit/debit cards, and online payments.
Adjustments Explanation
- Credit adjustments (negative) are subtracted from the patient's balance, while debit adjustments (positive) are added.
Insurance Payments Impact
- When insurance pays lower than billed, adjustments reduce the patient balance to zero, and credits may include discounts for timely payments.
Day Sheet Records
- A day sheet records charges, payments, previous balances, and adjustments.
Closing the Day
- "Closing the day" prevents further entries on that date, ensuring the accuracy of financial records.
Types of Bank Accounts
- Checking accounts for everyday transactions, savings accounts for saving money, and money market accounts as higher-interest accounts typically for larger balances.
Checking Account Functions
- Checking accounts allow account holders to authorize payments via checks written for specific amounts.
Interest Earning Accounts
- Savings and money market accounts can earn interest, unlike standard checking accounts.
Check Differentiaion
- Cashier's checks are drawn on the bank itself, while certified checks are personal checks guaranteed by the bank.
MICR Line
- The MICR line located at the bottom of a check contains the bank's ABA routing number.
Handling Check Errors
- If a check is written incorrectly, it should be marked as VOID without destruction for filing purposes.
Credit and Debit Card Policies
- Ensure proper procedures are in place for accepting cards, including obtaining patient signatures on receipts.
Check Acceptance Precautions
- Fraud prevention involves training employees to identify fraudulent checks, and checks must meet specific criteria (not post-dated, signed by the patient, etc.).
Balancing Cash Drawer
- At day's end, the initial cash amount should remain in the drawer, while all other funds are removed.
Check Handling in Medical Offices
- Checks must be endorsed on the back before cashing or depositing.
Special Endorsement Definition
- A special endorsement specifies the individual or entity for whom the check is intended.
Bank Statement Discrepancies
- Monthly bank statements may not align with office balance calculations due to timing of check clearing, vendor delays, interest accrual, and bank fees.
Medical Office Financial Accounts
- Typically includes petty cash for incidental expenses.
Managing Petty Cash Fund
- Petty cash is replenished from a bank account to ensure availability for emergencies.
Day Sheet Function
- A day sheet serves as a chronological record of daily transactions.
Ledger Function
- The ledger tracks all charges and payments for individual patients.
Service Level Determination
- The physician is responsible for deciding levels of service or procedures for patients.
Debit Adjustment Example
- Returned checks due to insufficient funds increase the patient's outstanding balance.
Credit Adjustment Example
- Discounts for prompt payment decrease what the patient owes.
Credit Card Acceptance Precautions
- Ensure the name on the credit card matches the patient's name.
Restrictive Endorsement Use
- Specifies that a check can only be deposited and not cashed, noted with "for deposit only" followed by a signature.
Copayment Definition
- A copay is the fixed amount a patient pays at each visit, established by the insurance provider as part of managed care.
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Description
Explore the key concepts of managing practice finances in this chapter quiz. Learn the differences between cash basis and accrual basis accounting, and understand the ways income is generated in a medical office. This quiz is designed to help reinforce your understanding of financial practices in healthcare.