CHAPTER 18 Accounting for the Medical Office © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-2 Learning Outcomes 18.1 Describe traditional bookkeeping systems 18.2 Explain the benefits of performing bookkeeping tasks on the computer 18.3 List banking tasks in a medical office 18.4 Describe the logistics of accepting, endorsing, and depositing checks from patients and insurance companies © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-3 Learning Outcomes (cont.) 18.5 Reconcile the office’s bank statements 18.6 Give several examples of disbursements 18.7 Record disbursements in a disbursement journal 18.8 Set up and maintain a petty cash fund 18.9 Create employee payroll information sheets © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-4 Learning Outcomes (cont.) 18.10Compute an employee’s gross earnings, total deductions, and net earnings 18.11Prepare an employee earnings record and payroll register 18.12Set up the practice’s tax liability accounts 18.13 Complete federal, state, and local tax forms 18.14 Submit employment taxes to government agencies © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-5 Introduction • Accounting – Administrative competency – Responsibilities of medical assistant • Bookkeeping • Banking • Bookkeeping – Systematic record of business transactions © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-6 Business Side of a Medical Practice • Accuracy – Strive for 100% – Records form a chain of information – Errors can result in loss of income by • Billing a patient twice for same service • Omitting bank deposits • Making improper payments to suppliers A medical practice is a business: income must exceed expenses! © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-7 Establishing Procedures • Maintain procedures in a logical and consistent manner • Be consistent in the way you handle transactions • Use check marks as you work to avoid errors • Write clearly with same type and color of pen • Double-check your work frequently • Keep columns of figures straight © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-8 Apply Your Knowledge What can be the result of in errors in billing? ANSWER: Errors can result in loss of income by billing a patient twice for same service, omitting bank deposits, and making improper payments to suppliers Good Answer! © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-9 Patient Accounting Methods • Computerized – most common • Manual – Single-entry – Pegboard • All methods record – – – – Income Charges Disbursements Other financial information © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-10 Patient Accounting Methods (cont.) • Bookkeeping on the computer – Performs same tasks as manual method – Saves time – Performs math calculations – Has built-in tax tables © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-48 Handling Payroll (cont.) • Calculating net earnings – Gross earnings – total deductions • Preparing paychecks – Amount for net earnings – Methods • Manual • Electronic banking • Payroll service – Check stub to track earnings and deductions © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-49 Handling Payroll (cont.) • Employee earning records – Each pay period • Gross earnings • Individual deductions • Net earnings • Payroll register – Summarizes vital information about all employees and their earnings – Update at the end of each pay period © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-50 Handling Payroll Electronically • Accounting or payroll software – Create, update, and delete employee files – Prepare employee paychecks, stubs, and W-2 forms – Update and print earning records – Update bookkeeping records • Payroll ledger • General ledger © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-51 Apply Your Knowledge Distinguish between FICA , SUTA, and FUTA ANSWER: FICA are taxes withheld for Social Security and Medicare SUTA covers the state unemployment taxes, and FUTA is the Federal Unemployment Tax Act © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-52 Calculating and Filing Taxes • Setting up tax liability accounts – Used to hold money withheld from paychecks until it is sent to appropriate government agencies – Bank must be authorized by the IRS to accept federal tax deposits • Understanding federal tax deposit schedules – IRS determines deposit schedule – Quarterly, monthly, or biweekly © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-53 Calculating and Filing Taxes (cont.) • Submitting federal income and FICA taxes – Electronic funds transfer (EFT) – Federal Tax Deposit (FTD) coupon (Form 8109) if EFT not used © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-54 Calculating and Filing Taxes (cont.) • Quarterly return – Provides a more complete accounting to IRS – Employer’s Quarterly Federal Tax Return (Form 941) • Submitting FUTA and SUTA © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-55 Calculating and Filing Taxes (cont.) • Handling state and local income taxes – Use appropriate • Forms • Procedures • Schedules • Filing wage and tax statements – W-2 • Taxable income for previous year – W-3 • Summarizes all employees’ earnings and federal income and FICA taxes withheld © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-56 Apply Your Knowledge What are the W-2 and the Form 941? ANSWER: The W-2 is the IRS form showing the employee’s total taxable income for the year The Form 941 is the Employer’s Quarterly Federal Tax Return Gold Star Answer! © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-57 In Summary 18.1 Traditional bookkeeping systems in the medical office are also known as patient accounting methods Some medical offices still use manual systems; however, most medical practices use computerized systems These systems record income, charges, disbursements and other financial information 18.2 Computerized bookkeeping saves time and reduces repetitive tasks 18.3 Banking tasks include writing checks, accepting checks, endorsing checks, making deposits, and reconciling bank statements © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-58 In Summary (cont.) 18.4 Accepting and endorsing checks from patients and insurance companies requires excellent financial skills Make sure you follow the policies and procedures of your office while completing these tasks 18.5 In reconciling a bank statement, make sure that the bank record of deposits, other payments, and withdrawals agrees with the medical facility’s record of deposits, payments, and withdrawals 18.6 Employee payroll, rent, and utilities payments are examples of medical office disbursements © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-59 In Summary (cont.) 18.7 You may record disbursements in a check register, journal, or the bottom section of a daily log Make sure you follow the proper record disbursement steps 18.8 Managing petty cash is needed for dispensing minor expenses When funds are depleted, make sure you replenish the account and write a check to “Cash.” 18.9 In creating an employment payroll information sheet, you must find out the employee’s pay schedule, number of dependents, payroll type (hourly or salaried), and any voluntary deductions © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-60 In Summary (cont.) 18.10 When computing an employee’s earnings, make sure you know the correct amount of hours worked, the hourly amount, and any deductions so that the net amount will be calculated correctly 18.11 Medical offices need to keep an employee earnings record for each employee When creating the record, obtain the necessary information such as name, social security number, and number of dependents At the end of each pay period, record earnings to date and other pertinent information © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-61 In Summary (cont.) 18.12 In setting up the practice’s liability account, it is important to hold the money deducted from employee’s paychecks until they can be appropriately disbursed to the government agencies Record the deposited amounts as debits in the practice’s checking account 18.13 When completing a practice’s tax forms, make sure that you submit the appropriate state and federal taxes, file an Employer’s Quarterly Federal Tax Return, and if necessary, prepare state and local quarterly tax returns as well Additionally, you will have to file Wage and Tax Statements for the practice 18.14 Federal, state and local tax returns should be filed quarterly for the medical office practice © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18-62 End of Chapter 18 Indoors or out, no one relaxes in March, that month of wind and taxes, the wind will presently disappear, the taxes last us all the year Nash ~ Ogden © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d [...]... Com panies, Inc A ll rights reserv e d 18- 22 18- 22 Banking Tasks • Check – bank draft or order for payment – Payer – person who writes the check – Negotiable – • Legally transferable from one person to another • To be negotiable a check must: – – – – – Be written, signed, and dated Include the amount to be paid Be made payable to payee Be made payable on demand or on a specified date Include the name... e d 18- 23 Banking Tasks (cont.) • Other negotiable papers – Cashier’s check – check issued on bank paper and signed by bank representative – Certified check – payer’s check written and signed by a payer and stamped “certified” by the bank – Money order – certificate of guaranteed payment © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 24 Banking Tasks (cont.) • Check codes – American... Geographic area and specific bank – Magnetic ink character (MICR) code • Numbers and characters at the bottom of check • Enables checks to be read, sorted, and recorded © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 25 Banking Tasks (cont.) • Types of checking accounts – Personal accounts – private financial matters – Business accounts – office expenses – Interest-earning account – used... check • Mark invoice with date, check number, and amount paid – Copy for office records • If you make an error when writing a check, write VOID in ink across the front of the check © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 36 Writing Checks (cont.) • Commonly used checks – Standard checks – Voucher checks – business checks with stubs attached – Limited check – void after a specified... statements – Reconciliation – Compare the office’s financial records with the bank records to ensure that they are consistent – Must be done once a month – Be sure all checks written are the same, and all checks deposited match on both records © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 31 Electronic Banking • Advantages – Improves productivity – Improves cash flow – Improves... use in a medical office? ANSWER: You might use these bookkeeping methods in a medical office: Single-entry Pegboard Electronic © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 21 18- 21 Banking for the Medical Office • Banking tasks – Writing checks – Accepting checks – Endorsing checks – Making deposits – Reconciling bank statements Keep all bank materials secure because they represent... such as taxes and insurance premiums © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 26 Banking Tasks (cont.) • Accepting checks – Check for: • Correct date • Correct amount • Signature – Do not accept a thirdparty check – Do not accept a check marked “Payment in Full” unless it actually pays the complete outstanding balance – Power of attorney – gives legal right to handle financial.. .18- 11 Single-Entry System • One entry per transaction • Disadvantages – Not self-balancing – Does not detect errors as readily – Fewer accuracy checkpoints © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 12 Single-Entry System (cont.) • Daily log – Chronological list of charges and payments received – Journalizing – • • • • Patient name Service provided... receivable – Shows total owed to the practice – Total of items on accounts receivable should equal outstanding balances on patient ledger cards • Accounts payable – Amount practice owes vendors – Compare with invoices – Keep accurate records of accounts paid © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 15 Single-Entry System (cont.) • Record of office disbursements – List of payments... reserv e d 18- 27 Banking Tasks (cont.) • Endorsing checks – Write the name of the doctor or practice on the back • Include “For Deposit Only” • Add bank account number – Use ink or rubber stamp © 2011 The McGraw -Hill Com panies, Inc A ll rights reserv e d 18- 28 Banking Tasks (cont.) • Deposit slip – Post the payment to the patient ledger card – Put the check with others to be deposited – Fill out