11.2 Consider the following income statement: BestCare Health Insurer Statement of Operations Year Ended June 30, 2016 (in Thousands) Revenue: Healthcare premiums $26,682 $26,682 Fees and other revenue 1,689 1,689 Net investment income 242 242 Total revenues $ 28,613 Benefits and expenses: Healthcare costs $ 15,154 Operating expenses: Selling expenses 3,963 General and administrative expenses 7,893 Interest expense 385 Total benefits and expenses $27,395 Net income $ 1,218 Compare and contrast this income statement with the ones presented in exhibits 11.1 and 11.2. What is BestCare’s total margin? How can it be interpreted? Exhibit 11.1 Depreciation expense $ 90,000 General/administrative expenses 70,000 Interest expense 20,000 Net income 30,000 Nonoperating income 40,000 Other operating revenue 10,000 Patient service revenue 440,000 Provision for bad debts 40,000 Purchased clinic services 90,000 Salaries and benefits 150,000
The Effect Of Prepaid Taxes On Assets And Liabilities
Many businesses estimate tax liability and make payments throughout the year (often quarterly). When a company overestimates its tax liability, this results in the business paying a prepaid tax. Prepaid taxes will be reversed within one year but can result in prepaid assets and liabilities.
Final Accounts
Financial accounting is one of the branches of accounting in which the transactions arising in the business over a particular period are recorded.
Ledger Posting
A ledger is an account that provides information on all the transactions that have taken place during a particular period. It is also known as General Ledger. For example, your bank account statement is a general ledger that gives information about the amount paid/debited or received/ credited from your bank account over some time.
Trial Balance and Final Accounts
In accounting we start with recording transaction with journal entries then we make separate ledger account for each type of transaction. It is very necessary to check and verify that the transaction transferred to ledgers from the journal are accurately recorded or not. Trial balance helps in this. Trial balance helps to check the accuracy of posting the ledger accounts. It helps the accountant to assist in preparing final accounts. It also helps the accountant to check whether all the debits and credits of items are recorded and posted accurately. Like in a balance sheet debit and credit side should be equal, similarly in trial balance debit balance and credit balance should tally.
Adjustment Entries
At the end of every accounting period Adjustment Entries are made in order to adjust the accounts precisely replicate the expenses and revenue of the current period. It is also known as end of period adjustment. It can also be referred as financial reporting that corrects the errors made previously in the accounting period. The basic characteristics of every adjustment entry is that it affects at least one real account and one nominal account.
11.2 Consider the following income statement:
BestCare Health Insurer Statement of Operations Year
Ended June 30, 2016 (in Thousands)
|
Revenue: |
|
|
Healthcare premiums $26,682 |
$26,682 |
|
Fees and other revenue 1,689 |
1,689 |
|
Net investment income 242 |
242 |
|
Total revenues |
$ 28,613 |
|
Benefits and expenses: |
|
|
Healthcare costs |
$ 15,154 |
|
Operating expenses: |
|
|
Selling expenses |
3,963 |
|
General and administrative expenses |
7,893 |
|
Interest expense |
385 |
|
Total benefits and expenses |
$27,395 |
|
Net income |
$ 1,218 |
- Compare and contrast this income statement with the ones presented in exhibits 11.1 and 11.2.
- What is BestCare’s total margin? How can it be interpreted?
Exhibit 11.1
|
|
$ 90,000 |
|
General/administrative expenses |
70,000 |
|
Interest expense |
20,000 |
|
Net income |
30,000 |
|
Nonoperating income |
40,000 |
|
Other operating revenue |
10,000 |
|
Patient service revenue |
440,000 |
|
Provision for |
40,000 |
|
Purchased clinic services |
90,000 |
|
Salaries and benefits |
150,000 |
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