Financial Accounting: An Integrated Statements Approach, 2nd Edition

Chapter 3 Accrual Accounting Concepts 103

Transaction g. Provided services of $6,100 to patients on account.This transaction is

similar to the revenue transactions that we recorded in September and October, except

that the services have been provided on account. Family Health Care will collect cash

from the patients’ insurance companies in the future. Such amounts that are to be col-

lected in the future and that arise from the normal operations of a business are called

accounts receivable. Since a valid claim exists for future collection, accounts receivable

are assets, and the transaction would be recorded as shown below.

Balance Sheet

Assets  Liabilities Stockholders’ Equity

Accts. Prepaid Office Notes Accts. Unearned Capital Retained

Cash Rec. Insur.Supp.Equip.LandPay.Pay.RevenueStockEarnings

4,020 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 3,320

6,100 6,100

4,020 6,100 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 9,420

Statement of Cash Flows

Statement of

Cash Flows

Income

Statement

Income Statement

g. 6,100 Fees earned

Balances

g. Fees earned on acct.

Balances

g.

Balance Sheet

Assets  Liabilities Stockholders’ Equity

Accts. Prepaid Office Notes Accts. Unearned Capital Retained

Cash Rec. Insur.Supp.Equip.LandPay.Pay.RevenueStockEarnings

4,020 6,100 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 9,420

5,500 5,500

9,520 6,100 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 14,920

Statement of Cash Flows

h. Operating 5,500

Statement of

Cash Flows

Income

Statement

Income Statement

h. 5,500 Fees earned

Balances

h. Fees earned for cash

Balances

h.

Transaction h. Received $5,500 for services provided to patients who paid cash.This

transaction is similar to the revenue transactions that we recorded in September and

October and is recorded as shown below.

Transaction i. Received $4,200 from insurance companies, which paid on patients’ ac-

counts for services that have been provided.In this transaction, cash is increased and the

accounts receivable is decreased by $4,200. Thus, only the mix of assets changes, and

the transaction is recorded as shown below.

Balance Sheet

Assets  Liabilities Stockholders’ Equity

Accts. Prepaid Office Notes Accts. Unearned Capital Retained

Cash Rec. Insur.Supp.Equip.LandPay.Pay.RevenueStockEarnings

9,520 6,100 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 14,920

4,200 4,200

13,720 1,900 8 ,400 240 8 ,500 12,000 16, 800 240 1, 800 11,000 14,920

Statement of Cash Flows

i. Operating 4,200

Statement of

Cash Flows

Income

Statement

Income Statement

Balances

i. Collected cash on acct.

Balances