 AMAs help with accounting
 Accounting- methodical recording, classifying , and
summarizing of business transactions
 Audit- review of all financial data in order to ensure
the accuracy and completeness of the data
 Either internal an accountant employed by the practice
or IRS
 Bookkeeping-accurate recording of transactions
 Daily journal
 Charge/receipt slips
 Patient ledger cards
 Accounts payable/receivable
 Monthly summary
 Balance sheet
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 Records are kept in paper format or in software
 Single-entry method
 Oldest
 One entry for each transaction
 Difficult
 Double entry method
 Requires more knowledge of accounting
 Assets=liabilities + owners equity
 One account is debited and another is credited for each
transaction
 More time consuming
 Pegboard method
 Most commonly used system
 Efficient and easy to learn
 Computer summaries
 Practice analysis report
 Aging reports
 Absolute accuracy
 Practices have 2 types of checking accounts:
 Regular business checking account (used most
frequently)
 Account that pays interest
 May also be savings account
 Money for taxes or expenses that are not immediate
will be kept in interest earning account
 Check-an order to a bank to pay a specific amount of
money
 Negotiable-to allow the legal transfer of money
 To be negotiable:
 Contain the specific amount to be paid
 Be made out (payable) to payee (could be the title of
company instead of a person’s name)
 Carry the name of the bank that is making the payment
 Specify the date on which the payment is to be made
 Be signed by the payer, person who is writing the check
and is promising to pay the money
 Postdated-dated for the future
 Predated-dated in the past
 Third-party checks-written by an unknown third party
 Check with an annotation of “Paid in Full”-cannot
accept this when it is not the full amount
 Blank endorsement-signature of the person to whom
the check is payable is placed on the back of the check
(can be cashed by anyone)
 Full endorsement-indicates the person, company,
account number, or bank to which the check is being
transferred followed by payee’s name
 Restrictive endorsement-safest and most commonly
used in business
 Restricted: For Deposit Only
 Deposits-checks and cash placed into the account
belonging to the practice
 Deposit slip
 Preprinted or at bank (blank)
 Proof
 Kept with check regsiter, checkbooks in secure place
Bank may return a check if:
 Not completed properly
 Missing date or signature
 Insufficient funds (NSF)-not enough money in the
account
 Returned with a fee of $25
 Physician must authorize with the bank who is
allowed to sign all checks
 One person to write and another to sign (safe-avoid
mistakes and misappropriations)
 2 signatures
 Bank reconciliation-the new balance on the statement
must be compared w/ the checkbook balance to determine
whether there is a difference between the amounts
 Steps:
 Compare cancelled checks from bank to bank statement
 Compare checks listed on statement with checkbook
 Compare deposits recorded in checkbook with statement
 Interest: record in checkbook
 Complete reconciliation form
 If final amount = great!
 If not, do again.
 Efficient and accurate
 Activities available online:
 Checking balances in the accounts
 Receive electronic deposits
 Find out which checks have cleared
 Transfer money from one account to the other
 Pay bills
 E-signature-a unique identifier
 Granted in June 2000, same as paper and pen signature
 Petty cash fund-fund containing small amounts of
cash to be used for small expenses
 Payroll-total earnings of all the employees in the
practice
 If your job you will be responsible for these tasks:
 Calculate the earnings of employees
 Subtract the correct amount of taxes and other
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deductions
Create employee payroll records
Prepare the salary checks
Submit payroll taxes
Keep current with formulas and regulations issued by
the IRS that affect payroll
 Create a payroll information record with the following
information:
 Name, address, SS#, marital status, # of dependents
 Pay schedule (how often they are paid: weekly or biweekly)
 Type of payment (straight salary or hourly)
 Employee requested deductions (employer sponsored
insurance plan, contributions to a savings plan, additional
taxes withheld)
 If not a citizen, must be authorized to work in the US
 Completed Employment Eligibility Verification Form
 Form I-9- Verifies the person is legally admitted alien or authorized
to work in this country
 Employer identification number (EIN)-enables the IRS
to track the financial activity; of employers in meeting
payroll and tax obligations
 AKA Tax identification number
 Direct earnings
 Salaries (fixed amounts paid regardless of hours
worked)
 Wages (pay based on an hourly or daily specific rate)
 When first hired, employees must complete the
Employee’s Withholding Allowance Certification
 Form W-4
 Number of allowances stated for exemptions to be used when
calculating taxes withheld
 Wage bracket tables supplied by the IRS
 Federal Insurance Contributions Act (FICA)
 Governs the social security system
 Law requires that a certain amount of money be
withheld for SS
 Employee pays half the required contribution and
employer pays other half
 The amount is deducted in two separate payroll taxes:
 One helps finance Medicare
 The other helps fund SS pension benefits
 These amounts are dictate by the IRS
 Are a percentage of the employee’s taxable earnings
 Congress can change this amount yearly
 Offices use spreadsheet programs to calculate payroll
 Gross earnings
 Salary-amount of earnings for the period
 Hourly-number of hours times hourly rate
 Exemptions; state and local tax deductions-find the # claimed by
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the employee on the W-4 form, refer to the IRS tax table for the
amount to be deducted, subtract them from gross earnings
FICA taxes-withhold and deduct half the amount due for the pay
period from gross earnings; other half paid by practice
Unemployment taxes-vary by state; withhold as necessary
Voluntary deductions-insurance, savings plan, additional tax
withholding, etc.
Employer’s obligation-Post the employer’s FICA contribution
and taxes due to fed and state unemployment funds to
physician’s account
Net earnings=Gross – total deductions
 Federal Unemployment Tax Act-FUTA
 Employers are required to help fund this account
 Used to help those who have been without work for a
specified period of time as they seek new employment
 Percentage of each employee’s gross salary but is not
deducted from employee’s salary-employer contributes
 Some states both employee and employer contributes
 Payments into a state unemployment fund are applied as
credit against the FUTA tax
 Tax return obligations: practice must make federal tax
withholding payments and FICA payments to a federal
deposit account in a Federal Reserve Bank
 IRS imposes severe penalty for lack of monthly deposits
 Employer has to file a quarterly tax return, Form 941 to report
federal income and taxes withheld from paychecks
 Law requires employer to retain payroll records for 4
years
 Records must contain:
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Name
SS#
Address
Number of exemptions claimed
Gross salary earned
Net salary paid
Income taxes withheld
FICA, state and local taxes deducted
 Direct deposit-the employee’s net pay is automatically
withdrawn from the practice’s account and deposited into
the employee’s account
 Electronic funds transfer (EFT)
 Physician office must contract with the bank for this
 Employees must give employers their checking account
numbers
 Employee receives a deposit stub showing gross, net, and
deductions
 Advantages
 Loss or theft of checks is eliminated
 Productivity and cost-savings are increased
 Convenience of eliminating trip to bank, money available day
of