Critical Thinking Questions Accounting and Finance Difference

Accounting has a primary function to provide and develop data measuring the performance and disclosure of the company or organization to assist managers, investors, tax authorities and decision makers - Critical Thinking Questions Accounting and Finance Difference introduction. The individual in the role of accounting is called an accountant and he or she has the responsibility to prepare financial statements such as balance sheets, income statements, and cash flows. The different categories for accounting are financial, cost, internal and external accounting. Finance has a function of decision making.

The financial manager or consultant is an individual who performs the decision making process and uses the information provided from the accountant to an organization about possible losses and profits. Finance has different ways in which businesses, individuals, and organizations allocate and raise monetary resources and this is also the usage for business purposes keeping the risks involved in mind. The different categories in which finance could be distributed are personal, public, and corporate finance. Financial and Managerial Accounting Difference

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Managerial accountant provides financial information that is used for making improved decisions regarding the future with the information for usage for analysis. Finance officer often performs these duties. Financial accounting is used for a company or organization to make financial decisions. Financial report provides factual or predict value of the company and where the company stands. Concentration for the financial accounting is for production including the reporting of profitability, liquidity, or solvency.

These reports are prepared using scientific methods to arrive at certain values which are then used for decision making and may include sales budgeting, budget analysis and comparative analysis; merger or consolidation. In comparison, financial accounting is designed to record the financial history of an organization, whereas, managerial accounting provides financial information that could be used to improve future decisions (Finkler & Ward, 2006). Both financial and managerial accounting is used for organizations due to their decisions to make appropriate changes or improvements to current or future activities.

Financial Risk and Return Relationship The relationship of rate and risk of can be directly connected. As the risk level of an investment increases, the return can potentially increases as well. Investment risk and return are associated with various types of investment options. Individuals have two types of expectations about the future they are certainty and uncertainty. The actual return and investment will not be the same as the expected return for either will be higher or lower.

An investor too will want to avoid risk, and will hope the returns from the investment are the same or expected to be more. The risk of a security and the portfolio are standards deviation of an expected return. A portfolio is the difference in collecting of an investment that make up the total holding of the investor and shares or in the capital project of a company. Companies and individuals need to find a comfort level with risk and construct a strategy of investing around that level.

US Healthcare System Complexity. The US Healthcare system seems completed compare to other countries because individuals are uninsured or the problems of insurance companies. Many individuals in the United States are covered by government and private insurance programs such as Medicare, Medicaid, or various state and local programs. Francis (2008) discovered that healthcare expenditures rose in the US to 6. 7% in 2006 to $2. 1 trillion for the total output of goods and services, with the government predicting by 2017 to reach $4 trillion.

Other nations, with universal care, spend 11 to 12% of their gross domestic product (GDP) on healthcare with Canada spending around 9%. US health costs have doubled in the past decade and 48 million Americans have no health insurance. Commonwealth Connector (2008) reported as of August 2008 there were 439,000 newly insured and 191,000 private coverage Massachusetts residents under the new Healthcare Reform. Residents that have enrolled in a private health insurance did with employer-subsidized plans and free care services were down 41% compared to the first quarter of the fiscal years of 2007 and 2008.

When Healthcare Reform became law on April 12, 2006, there were 650,000 uninsured people in Massachusetts, and progress since then has been dramatic. Government, employers, healthcare providers and citizens have all had a role in achieving this success. How Healthcare Organizations Are Paid The healthcare market is increasing and relying more on clinical evidence for reimbursement even if problems with bad debt expenses are present. Medicare Physician Fee Schedule (MPFS) is an adjusted to reflect the variation in the cost in a practice from multiple geographical areas.

Centers for Medicare Services (CMS) (2008) explains the geographic practice cost index (GPCI) is established for any Medicare payment for each of the three components of a procedure’s relative value unit (RVU) this includes practice expense and malpractice. Providers within the healthcare organization get paid based on the allowed amount of the charges billed. Physicians and Facilities may already have an established or base charge amount for a procedure, but when submitted to an insurance company reimbursement is made based on the group section of the allowed amount.

When the reimbursement is from the allowed charge and the procedure there is a balance that will need to be written off, because the balance between the contacted and the procedure amount cannot be balanced billed to the patient. Other scenario other than medical insurance companies occurs when the patient has workers compensation and motor vehicle accidents. These claims are also negotiated services between the provider and insurance company, but still very rare are the claims paid at 100%.

Charges and Revenue for Healthcare Organizations. Revenue is the net amount after charges have been reduced by charity services, contractual adjustments, and other allowances. When it comes to charges healthcare organizations use the charges as what they are spending on a case or office visit, while these charges are not reimbursable in full this does show the amount that was charges to what has been paid. If you have established charges and one payer pays 100% of the charges, the revenue should be reported on the basis of charge, but when a discount from the charges is performed a contractual or regulatory provision that revenue should be reported as a discount.

Healthcare providers have been forced to raise charges so the revenue from the lower number of patients paying help offset any deficiencies made by third-parties on behalf of other patients. While payment and charges have been topic of conversation among healthcare providers the cost of providing care is rising for all healthcare providers and organizations with payment rates declining from some insurance companies.

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