Shop Courses > Health Care Accounting

Health Care Accounting #368326

Course Overview

Credit

Amount

CPA

Course Author: Steven M. Bragg, CPA Field of Study (CPA): Accounting

Course Description

Course publication/revision date: This course was updated on 4/15/2026.

Health care is one of the largest industries in the world, and involves some of the most complex accounting transactions. Given the financial challenges facing the industry, it is essential for the health care accountant to have a firm grasp of financial accounting. This course discusses the accounting and financial reporting issues related to hospitals, medical group practices, nursing homes, and other health care entities. The course covers the basic system of accounting, financial reporting, and many practical topics for the accountant, including revenue recognition, payroll accounting, fixed asset accounting, debt liabilities, and more.

Table of Contents

Prefacexiii

Chapter 1 Overview of the Health Care Entity1

Learning Objectives	1
Introduction	1
Types of Health Care Organizations	2
North American Industry Classification System Codes	2
Applicable Accounting	3
Financial Reporting Requirements	4
The Structure of this Book	4
Summary	5
Review Questions	6

Chapter 2 The System of Accounting7

Learning Objectives	7
Introduction	7
Financial Accounting Basics	7
Accounting Frameworks	9
Accounting Principles	10
The Accounting Cycle	11
Accounting Transactions	12
Types of Transaction Cycles	12
Source Documents	13
Double Entry Accounting	13
The Accounting Equation	14
Journal Entries	16
The Accruals Concept	18
The Chart of Accounts	18
Major Journal Entries	20
The Ledger Concept	21
Posting to the General Ledger	23
General Ledger Overview	23
The Trial Balance	24
The Trial Balance Format	25
The Extended Trial Balance	26
Accrual Basis of Accounting	27
Cash Basis of Accounting	28
The Financial Statements	28
The Income Statement	29
The Balance Sheet	30
The Statement of Cash Flows	31
Summary	34
Review Questions	35

Chapter 3 Not-for-Profit Accounting and Reporting36

Learning Objectives	36
Introduction	36
The Accounting Equation	36
Net Assets	37
Net Assets without Donor Restrictions	37
Net Assets with Donor Restrictions	37
Net Assets Summary	37
Types of Revenue	38
Promises to Give	38
Exchange Value	39
The Allowance for Uncollectible Pledges	39
Overview of Government Grants	40
Grant Accounting	40
Income from Government Grants	42
Required Not-for-Profit Financial Statements	42
Statement of Financial Position	42
Statement of Activities	43
Statement of Cash Flows	45
Summary	46
Review Questions	47

Chapter 4 Governmental Accounting and Reporting48

Learning Objectives	48
Introduction	48
Fund Accounting Systems	48
Basis of Accounting and Measurement Focus	48
Fund Contents	49
Budgetary Reporting	49
Interfund Activity	50
Asset Transfers	50
Presentation Issues	50
Reporting Net Position	50
Required Enterprise Fund Financial Statements	51
Statement of Net Position	51
Statement of Revenues, Expenses, and Changes in Fund Net Position	53
Statement of Cash Flows	54
Summary	58
Review Questions	59

Chapter 5 Cash and Receivable Accounting60

Learning Objectives	60
Introduction	60
Check Receipts	60
Check Receipt Improvements	61
The Bank Lockbox	61
Remote Deposit Capture	62
Cash Receipts	62
Credit Card Receipts	63
The Bank Reconciliation	63
The Not Sufficient Funds Concept	65
Bank Reconciliation Problems	66
The Daily Bank Reconciliation	66
Billings	66
Third-Party Payor Payment Methods	67
Valuation of Receivables	67
Calculating and Recording Bad Debts	68
Direct Write-Off Method	68
Allowance for Doubtful Accounts	68
Estimation of Bad Debts	69
Contractual Adjustments	69
Summary	69
Review Questions	70

Chapter 6 Inventory Accounting71

Learning Objectives	71
Introduction	71
The Periodic Inventory System	71
The Perpetual Inventory System	73
The Physical Inventory Count	74
Inventory Cost Layering Overview	76
The First in, First Out Method	77
The Last in, First Out Method	78
The Weighted Average Method	80
Estimating Ending Inventory	81
Summary	82
Review Questions	83

Chapter 7 Fixed Asset Accounting84

Learning Objectives	84
Introduction	84
What are Fixed Assets?	84
Types of Fixed Assets	85
Accounting for Fixed Assets	87
The Capitalization Limit	88
The Base Unit	88
The Initial Measurement of a Fixed Asset	89
The Purpose of Depreciation	90
Depreciation Concepts	90
Accelerated Depreciation	91
Sum-of-the-Years' Digits Method	92
Double-Declining Balance Method	93
Straight-Line Method	94
The Depreciation of Land	94
The Depreciation of Land Improvements	95
Depreciation Accounting Entries	95
Accumulated Depreciation	96
Asset Impairment	97
Asset Derecognition	98
Abandoned and Idle Assets	99
Asset Disposal Accounting	100
Summary	101
Review Questions	102

Chapter 8 Asset Retirement and Environmental Remediation Obligations103

Learning Objectives	103
Introduction	103
Overview of Asset Retirement Obligations	103
The Initial Measurement of an Asset Retirement Obligation	104
Subsequent Measurement of an Asset Retirement Obligation	105
Settlement of an Asset Retirement Obligation	106
Overview of Environmental Obligations	108
Measurement of Environmental Obligations	109
Recoveries Related to Environmental Obligations	110
Summary	111
Review Questions	112

Chapter 9 Current Liabilities113

Learning Objectives	113
Introduction	113
Current Liabilities	113
Prepaid Health Care Services	114
Bonus and Risk Retention Plans	114
Accounting for Accounts Payable	114
Common Accounts Payable Journal Entries	114
Aged Accounts Payable Report	115
Early Payment Discounts	116
Accounting for Accrued Liabilities	117
Deferred Compensation Arrangements	118
Deferred Revenues	118
Commitments	119
Contingencies	122
Stop-Loss Insurance Arrangements	123
Medical Malpractice Claims	123
Guarantees	123
Presentation Issues	124
Disclosures	124
Summary	124
Review Questions	125

Chapter 10 Debt Liabilities126

Learning Objectives	126
Introduction	126
Basic Debt Accounting	126
The Amortization Schedule	128
Reconciling the Debt Account	128
Debt Modifications and Extinguishments	129
Bond Overview	130
Municipal Bond Financing	131
Bond Premiums and Discounts	132
Summary	135
Review Questions	136

Chapter 11 Revenue Recognition137

Learning Objectives	137
Introduction	137
Steps in Revenue Recognition	137
Step One: Link Contract to Customer	137
Step Two: Note Performance Obligations	138
Step Three: Determine Prices	140
Variable Consideration	140
Possibility of Reversal	141
Time Value of Money	142
Step Four: Allocate Prices to Obligations	144
Allocation of Price Discounts	145
Subsequent Price Changes	146
Step Five: Recognize Revenue	147
Measurement of Progress Completion	148
Change in Estimate	149
Progress Measurement	150
Consistency	150
Entitlement to Payment	150
The Health Care Revenue Environment	151
Charity Care	152
Naming Opportunities	152
Patient Payments	153
Use Fees	153
Presentation	153
Disclosures	153
Summary	153
Review Questions	154

Chapter 12 Payroll Accounting155

Learning Objectives	155
Introduction	155
Gross Pay Calculations	155
Hourly Rate Plan	155
Overtime	156
Types of Payroll Taxes	158
Social Security Tax	158
Medicare Tax	158
Unemployment Taxes	159
Income Tax Withholdings	160
Benefits and Other Deductions	163
Net Pay	164
Remitting Payroll Taxes	164
Types of Tax Deposit Schedules	164
Monthly Deposit Schedule	165
Semiweekly Deposit Schedule	166
Federal Unemployment Deposit Schedule	167
Remittance Method	167
The Form 941 Quarterly Federal Tax Return	167
State Tax Remittances	168
Payments to Employees	168
The Payroll Register	169
Form W-2	171
Payroll Journal Entries	172
Types of Payroll Journal Entries	172
Primary Payroll Journal Entry	173
Accrued Wages	174
Manual Paycheck Entry	175
Employee Advances	176
Accrued Vacation Pay	176
Tax Deposits	177
Summary	178
Review Questions	179

Chapter 13 Split-Interest Agreements180

Learning Objectives	180
Introduction	180
Split-Interest Agreements	180
Types of Split-Interest Agreements	181
Accounting for Split-Interest Agreements	181
Initial Measurement	182
Ongoing Measurement	183
Termination	183
Classification of Net Assets	183
Summary	184
Review Questions	185

Chapter 14 Affiliated Organizations186

Learning Objectives	186
Introduction	186
Affiliated Organizations	186
Special Purpose Entities	187
Noncontrolling Interests	188
Related Parties	188
Summary	189
Review Questions	190

Chapter 15 Special Accounting Topics191

Learning Objectives	191
Introduction	191
Advertising Expenses	191
Agency Funds	191
Cost of Goods Sold	192
Nonreciprocal Transfers	193
Prepaid Expenses	194
Prepaid Health Services	194
Related Fundraising Entities	195
Sale and Leaseback Transactions	195
General Presentation Issues	196
Presentation Issues Specific to Not-for-Profit, Business-Oriented Entities	196
Disclosures	196
Summary	197
Review Questions	198

Chapter 16 Management Accounting in Health Care199

Learning Objectives	199
Introduction	199
Full Costing Analysis	199
Step 1. Define Cost Objects	199
Step 2. Determine Cost Centers	199
Step 3. Identify the Nature of Applicable Costs	200
Step 4. Identify Allocation Bases	201
Step 5. Select an Allocation Methodology	202
Step 6. Link Identified Costs to Cost Objects	202
Uses for Full Costing	202
Summary	203
Review Questions	204

Answers to Chapter Questions205

Glossary218

Index223

Course Details

Author: Steven M. Bragg, CPA

Steven Bragg, CPA, has been the chief financial officer or controller of four companies, as well as a consulting manager at Ernst & Young. He received a master’s degree in finance from Bentley College, an MBA from Babson College, and a Bachelor’s degree in Economics from the University of Maine. He has been a two-time president of the Colorado Mountain Club, and is an avid alpine skier, mountain biker, and certified master diver. Mr. Bragg resides in Centennial, Colorado. He has written more than 300 books and courses, including New Controller Guidebook, GAAP Guidebook, and Payroll Management.

Publication/Revision Date: 4/15/2026

Course Exam Questions (online): 60 (multiple-choice)

Program Delivery Method: NASBA QAS Self-Study

Available Formats of Course Text: PDF or PDF plus printed copy sent in the mail

Course Level, Prerequisites, and Advance Preparation Requirements

License	Course Level	Prerequisites	Advance Preparation Requirements
CPA	Overview	None	None

* This program is appropriate for professionals at all organizational levels.

Sponsor ID Numbers

National Registry of CPE Sponsors ID: 107615

State CPA Board Sponsor ID Numbers (where applicable)

Florida Division of Certified Public Accounting: 0004761

Hawaii Board of Public Accountancy: 14003

New York State Board for Public Accountancy: 002146

Ohio Accountancy Board: CPE .51 PSR

Pennsylvania State Board of Accountancy: PX178025

Texas State Board of Public Accountancy: 009349

Learning Objectives

As a result of studying the course material, you should be able to meet the objectives listed below:

Understand why health care is one of the most examined industries in the country.
Cite the financial statements used by each of the different types of health care entities.
Specify the accounting principles that apply to health care entities.
Describe the nature of the accounting cycle.
Specify why the out-of-balance concept harms a system of accounting.
Recognize the source of the trial balance.
Discuss how the extended trial balance is used.
Recognize the characteristics of the accrual basis of accounting.
Identify the formula underlying the balance sheet.
Specify the criteria that define a not-for-profit entity.
Describe the proper accounting for all variations on a pledge.
Recognize the nature of a performance indicator.
Recognize the nature of net assets for a not-for-profit entity.
Recognize the key characteristics of a fund.
Identify the key components of net position in a financial statement.
Describe the uses to which a bank reconciliation can be put.
Cite the elements of a bank statement.
Recognize the various reconciliation problems that may be encountered when preparing a bank reconciliation.
Identify the characteristics of the different methods used to account for bad debts.
Describe the characteristics of the different inventory tracking systems.
Specify the advantages and disadvantages of the different inventory costing methods.
Describe the calculation for the gross profit method.
Recognize the costs to be capitalized for a fixed asset.
Describe the derivation of a fixed asset’s useful life.
Identify the nature of the mid-month convention.
Specify the calculation used to develop an accelerated depreciation method.
Specify the accounting for an idle fixed asset.
Describe the accounting for an asset retirement obligation.
Define accretion expense.
Specify the calculation method used to derive the interest rate inherent in an early payment discount.
Describe the accounting for advance fees.
Cite the different types of standard payment methods required of residents by continuing care retirement communities.
Describe the accounting for the extinguishment of debt.
Describe the different types of bonds and the features that can be incorporated into the terms of a bond.
Recognize the circumstances under which the tax-exempt status of a bond can be lost.
Specify the factors involved in the determination of revenue.
Identify the circumstances under which the expected value method can be used.
Recognize the accounting for naming rights.
Recognize the calculation methods used to determine wages.
Describe how unemployment tax rates are developed for a new employer, and thereafter.
Describe the uses to which the Form W-4 can be put.
Specify how the wage bracket method is used to determine tax withholdings.
Recognize the different methods that are available for setting payroll tax deposits.
Specify the characteristics of a split-interest agreement.
Describe which features of a relationship between entities trigger a consolidation of their financial statements.
Understand the accounting for advertising expenditures.
Specify the proper accounting for a trust fund that is being used to settle malpractice claims.
Recognize the different types of cost allocation methods that can be used in a full costing system.