Health Services Resource Management Assignment 1 - Financials

This assignment solution provides a comprehensive analysis of financial statements and accounting principles within the context of health services resource management. The solution begins with a detailed examination of a balance sheet, income statement, and cash flow statement, including calculations and explanations of significant changes and financial ratios. It then contrasts cash and accrual accounting methods, illustrating their differences with numerical examples and explaining their impact on profit and loss calculations. The document also addresses the advantages of accrual accounting for healthcare managers, emphasizing its ability to reflect the true economic reality of the business. Furthermore, the solution includes the preparation of a flexible budget for a health clinic, calculates break-even points, and analyzes actual versus budgeted results, providing insights into financial performance and management decision-making. The content provides a deep dive into financial analysis, accounting, and budgeting within the healthcare sector.

Running Head: Health Services Resource Management
Health Services Resource Management
Assignment 1
Student Name

Health Services Resource Management
Question 1:
(a)
Balance-sheet
2,015 2,014
Assets
Current-Assets
Short term receivables 11,80,862 13,10,776
Cash and Cash Equivalents 45,36,985 31,27,657
Inventories of drugs 40,139 34,333
Other Current Assets 20,428 1,08,328
Total Current-Assets 57,78,414 45,81,094
Non-Current Assets
Long term receivables 87,767 36,478
Motor vehicles 2,000 2,000
Property, Plant & Equipment 82,93,627 89,59,514
Total Non- Current Assets 83,83,394 89,97,992
Total Assets 1,41,61,808 1,35,79,086
Liabilities
Current-Liabilities
Short-term payables 3,26,708 6,98,129
Short term staff benefits 10,99,853 9,09,310
Other current liabilities 38,69,052 27,53,096
Total Current-liabilities 52,95,613 43,60,535
Non-Current Liabilities
Long term loans 2,40,877 1,74,900
Total Current-liabilities 2,40,877 1,74,900
Total Liabilities 55,36,490 45,35,435
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Health Services Resource Management
Equity 86,25,318 90,43,651
Total Equity 86,25,318 90,43,651
(b)
Income Statement
2,015 2,014
Income
Patient Fees revenue 27,40,239 25,10,626
Private practice fee revenue 2,86,996 3,06,927
Government Grants 34,23,015 34,22,197
State government grants 64,048 74,586
Car park revenue 42,507 99,723
Capital Purpose Income 2,71,521 3,39,864
Interest and dividends received 92,012 63,385
Other revenue 8,21,057 6,83,808
77,41,395 75,01,116
Expenses
Salary and wages 50,60,578 48,87,643
Medical expenses 80,982 77,529
Drug expenses 19,111 72,768
Food expenses 2,39,035 2,37,695
Fuel, Light, Power and Water 1,46,913 1,23,338
Superannuation 3,99,074 3,99,131
Work cover insurance 1,03,930 84,714
Insurance costs 3,689 63,889
Lease Expenses 80,109 78,321
Maintenance Contracts 34,639 43,560
Motor Vehicle Expenses 41,905 47,613
Non-Salary Labour Costs 36,561 17,644
Patient Transport expenses 810 4,531
Repairs & Maintenance 71,237 48,672
Other Administrative Expenses 9,20,244 9,03,036
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Health Services Resource Management
Accounting fees 13,400 970
Audit Fees 9,405 9,495
Bad & Doubtful Debts 0 407
Depreciation and Amortisation 7,30,304 7,09,452
Domestic Service expenses 1,67,802 1,46,659
81,59,728 79,57,067
Net Profit -4,18,333 -4,55,951
(C)
Two significant changes in the company's financials are:
1) Increase in current assets of 11,97,320 (+26% year on year change) and decrease in non-
current assets of 6,14,598 (-7%) resulted in the increase in total assets of 5,82,722 (+4%
yoy).
2) Increase in current liabilities of 9,35,078 (+21% yoy) and increase in non-current liabilities
of 65,977 (38%) resulted in the increase in total liabilities of 10,01,055 (+22% yoy).
Ability to pay short-term debts can be seen via liquidity ratios:
2015 2014
Current Ratio = Current Asset / Current
liabilities
1.091169993 1.05058072
(57,78,414/52,95,613) (45,81,094/43,60,535)
Current ratio of company in 2015 is more than 1 and even this ratio has increased slightly as
compared to 2014. So, the company's ability to pay short term debt is good.
(d)
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Health Services Resource Management
Cash-flow statement
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Health Services Resource Management
2015 2014
Cash at beginning of period 12,43,626 11,25,445
Cash-flow from operations
Receipts
Capital Grants from Government 33,429 1,08,029
Operating Grants from Government 34,87,063 35,06,782
Patient and Resident Fees Received 29,30,781 22,57,929
GST Received from ATO 8,020 172
Donations and Bequests Received 33,128 38,724
Other Capital Receipts 0 33,296
Other Receipts 6,92,338 8,10,792
71,84,759 67,55,724
Payments
Payments for Supplies & Consumables 16,92,467 13,28,683
Non Salary Labour Costs 36,561 17,644
Employee Expenses Paid 51,86,520 51,30,345
69,15,548 64,76,672
Net cash receipts from operations 2,69,211 2,79,052
Cash-flow from investing
Proceeds from sale of Non-Financial Assets 0 32,600
Payments for Non-Financial Assets 63,571 2,64,621
Net cash receipts from investing activities -63,571 -2,32,021
Cash-flow from financing
Interest Received 88,727 71,150
Net cash receipts from investing activities 88,727 71,150
Total periodic cash receipts 2,94,367 1,18,181
Cash at end of period 15,37,993 12,43,626
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Health Services Resource Management
(e)
2015 2014
Net cash inflow = Cash at end of
period - Cash at starting period
2,94,367 1,18,181
15,37,993 - 12,43,626 12,43,626 - 11,25,445
Profit/Loss according to income
statement = Accounting Income -
Accounting Expense
-4,18,333 -4,55,951
(77,41,395 - 81,59,728) (75,01,116 - 79,57,067)
The main reason for difference between these two figures is that accrual accounting is used to
calculate net profit/loss in income-statement and cash accounting is used to calculate net
cash-flow in cash-flow statement. In accrual accounting revenue is recorded when it is earned
(independent of the cash movement) and expenses are matched with the revenues. In cash
accounting transactions are recorded depending upon the cash receipts and payments.
Question 2:
(a)
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Health Services Resource Management
March
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Health Services Resource Management
Accrual
Account
ing
Revenues
Patients receive health care
services
60000
Patients receive health care
services of $250,000 on terms of
net 30 days
250000
Expenses
hospital pays $50,000 for
salaries for work done in March
50000
Monthly Rent 4000 ((Total rent of four
month 16000/4))
Phone expense 1000
Accounting Profit/Loss 255000
Cash
Account
ing
Cash inflow
Patients pay $60,000 for health
care services received on March
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60000
Cash outflow
paid rent in advance for the
months of March, April, May
and June - $16,000Rent
16000
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Health Services Resource Management
hospital pays $50,000 for
salaries for work done in March
50000
Cash Profit/Loss -6000
April
Accrual
Account
ing
Revenues
Patients receive health care
services of $250,000 on terms of
net 30 days
250000
Expenses
Monthly Rent 4000 ((Total rent of four
month 16000/4))
Drugs Used 35000
hospital pays $55,000 for
salaries for work done in March
55000
Accounting Profit/Loss 156000
Cash
Account
ing
Cash inflow
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Health Services Resource Management
Patients pay $250,000 for
services received in March.
250000
Cash outflow
hospital pays $55,000 for
salaries for work done in March
55000
Cash Profit/Loss 195000
May
Accrual
Account
ing
Revenues
Patients receive health care
services of $200,000 on terms of
net 30 days
200000
Expenses
Monthly Rent 4000 ((Total rent of four
month 16000/4))
Drugs Used 65000
Hospital pays $45,000 for
salaries for work done in May
45000
Accounting Profit/Loss 86000
Cash
Account
Cash inflow
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Health Services Resource Management
ing
Patients pay $250,000 for
services received in April.
250000
Cash outflow
Hospital pays phone bill for
$1,000 received on April 7.
1000
The hospital pays $160,000 for
drugs received in April.
160000
Hospital pays $45,000 for
salaries for work done in May
45000
Cash Profit/Loss 44000
June
Accrual
Account
ing
Revenues
Patients receive $55,000 in
services and pay for them on the
same day
55000
Expenses
Monthly Rent 4000 ((Total rent of four
month 16000/4))
Drugs Used 60000
Pays $50,000 cash for drugs 50000
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Health Services Resource Management
Hospital pays $40,000 for
salaries for work done in June
40000
Accounting Profit/Loss -99000
Cash
Account
ing
Cash inflow
Patients receive $55,000 in
services and pay for them on the
same day
55000
Patients pay $200,000 for
services received in May
200000
Cash outflow
Pays rent of $16,000 in advance
for the months of July, August,
September and October.
16000
Pays $50,000 cash for drugs 50000
Hospital pays $40,000 for
salaries for work done in June
40000
Cash Profit/Loss 149000
The reason for the difference between these two calculations is that in accrual accounting
revenue is recorded when it is earned (independent of the cash movement) and expenses are
matched with the revenues. In cash accounting transactions are recorded depending upon the
cash receipts and payments.
In March the accrual accounting profit of 255000 was too high as compared to loss according
to the cash accounting. The reason for this is the high revenues in this month but the cash for
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