Accounting System Paper Jamira Perry HCS/405 July 18, 2011 Diana Schilling Accounting System Paper When it comes to accounting, people only think that it is associated with inside banking. There is more to accounting than inside banking because accounting has elements as well as any other system. It may differ from other types of systems because it is just what it says and that is accounting. Some people don’t like the accounting situation because it consists of math and that is something they are not into.
I am going to discuss some of the elements of the accounting system and why accounting is important for healthcare organizations. One element of accounting is chart accounts, which is a list of each item in the system. The chart accounts are divided in to five sections and they are assets, net assets or fund balances, liabilities, expenses, and revenues. The things about chart accounts is that each account has its own individual identifying number so the system will know exactly who it belongs to. The second type of element of accounting is the general ledger, and this organizes information by the accounts.
The thing about this is that the chart accounts acts like the contents to the general ledger and the general ledger maintains a year-to-date account balance for each account in the system. The data is entered into the system only once and once this happens, the data entry has to be approved by the user. The third element is journals and subsidiary journals, which is called books of original entry and used to record accounting transactions way before they are entered into the general ledger. The journals are organized by information chronologically and by the transactions types such as receipts and disbursements.
There are three main journals and they are the cash disbursement journal, cash receipts journal, and he general journal. The cash disbursement journal is the chronological record of the checks that people write, the cash receipt journal is a chronological record of all the deposits which are made, and the general journal is a record of all transactions that do not pass through a person’s checkbook and that includes both non cash transactions and the corrections to previous journal entries. When it comes to subsidiary journals, it involves two main types, the payroll journal and the accounts payable journal and accounts receivable journal.
The payroll journal records all payroll related transactions and is useful payroll transactions continue to grow and soon becomes too big to handle within the cash disbursements journal. The accounts payable journal and accounts receivable journal tracks the income and expense accruals. This is useful for grouping income and/or expense accruals and further on down the line, this eliminates cash disbursements and receipts journals. When the information is transferred from the journals to the general ledger, it is called posting. The fourth type of element is the checkbook and it serves as the combined ledger and journal.
This is where majority of the financial transactions pass through and where the receipts are deposited and disbursements are officially made. Within small organizations and with the few deposits and disbursements that are made, this reports directly from the checkbook which after the balance has already been reconciled with the balance that is at the bank. Last but not least and the fifth type is the accounting procedures manual and this is the manual which is a record of all the policies and procedures that are for handling the financial transactions.
The manual is basically the description of how the financial functions are being handled whether it is from paying bills, depositing money, or transferring money into different accounts. It also shows who is responsible for what when it comes to accounting and is very useful for when there is a change in the financial management staff. I am now going to tell why accounting is necessary for healthcare organizations. Accounting is necessary for healthcare organizations because they have get reports that are from healthcare facilities.
That means that healthcare facilities have to report to third parties such as Medicaid, Medicare, and other government programs as well as healthcare plan payers. Not only that but the third parties have to send a report stockholders, taxing districts hospitals have to report taxpayers, and the list goes on and on. This will let the government know exactly how much a person is using of their insurance as well as the insurance companies. With the different types of accounting elements, a person should have an idea to how the system works and why accounting is really needed.
I have explained and broke down the different elements of accounting and why it is necessary in healthcare organizations. I hope that what I have researched and written in this paper better helps you to understand why a person needs accounting, even if they are in the health field and not just banking. References Baker, J. J. , & Baker, R. W. (2011). Health care finance: Basic tools for nonfinancial managers (3rd ed. ). Jones & Bartlett. Labyrinth Inc.. (2011). . Retrieved from http://www. labyrinthinc. com/SharedContent/SingleFaq. asp? faqid=29