NEDAA ALDAIRI Accounting Functions COLLAPSE Two methods of accounting are well-

NEDAA ALDAIRI
Accounting Functions
COLLAPSE
Two methods of accounting are well-known in the field of health services; cash-based accounting and accrual-based accounting. The main difference is the timing of cash flow, and each method has advantages and disadvantages. Generally, those methods help evaluating the performance of business, ensure statuary compliance like liability, taxes, and pension, create budget and future projections, and they are the basis to formulate a financial statement (Weygandt et al., 2015).
Cash based accounting records revenues and expenses when the cash flows irrespective of the timing of actual transaction. It is suitable for small organizations rather than bigger ones as the capital is somewhat limited and cash flow is necessary to maintain operations. On the contrary, accrual accounting records the transaction in financial statements at its actual timing. This method of accounting helps an organization to obtain an accurate image of number of transactions that may happen in a given time frame, e.g. quarterly or fiscal year. However, balanced time-limited financials won’t accurately account for the revenues and accordingly, performance might be relatively vague. “Medical Practice Management Report” may be used to measure performance of a health practice statistics for evaluations against benchmarks (George Washington University’s Online Healthcare MBA, 2021).
Operational oversight is remarkably affected by the implemented accounting method. Accounting function is essential to maintain the stability of financial status and requirement within the institute while inflow and outflow must be in balance to sustain the operations. For example, as most small health businesses use cash-based accounting, the cash flow may be insufficient at some point if the payers are delayed, and the revenues in financial statement will be off compared to expenses. A wise course of action is prioritizing the due expenses or adjust the timing. In accrual method, statements reflect transactions rather than cash flow. Although this might not be impactful on day-by-day operations, it may be confusing to evaluate the actual inflow and outflow of certain procedure or employee.
1. Weygandt, J. J., Kimmel, P. D., & Kieso, D. E. (2015). Accounting Principles. John Wiley & Sons.
2. George Washington University’s Online Healthcare MBA. (2021, December 14). Accounting in Health Care: What You Need to Know. George Washington University. https://healthcaremba.gwu.edu/blog/accounting-in-h…
this is was qoustion
There are a number of unique factors relating to the health services sector:
Compare the two types of accounting functions.
Describe how the accounting functions affect operational oversight.
How do these unique features affect the financial management of the sector?