The purpose of this assessment is to assess your understanding of the key financial concepts, your...

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The purpose of this assessment is to assess your understanding of the key financial concepts, your ability to apply this understanding to the interpretation of financial statements and to the preparing and analysing of budgets. Specifically, you should be able to: • Identify the three main financial statements – i.e. the balance sheet, profit and loss statement and cash flow statement. • Have a working knowledge of the doctrines and conventions of accounting - such as relevance, reliability, materiality and timeliness. • Explain the difference between cash and accrual accounting. • Calculate a break-even point. • Construct and analyse balance sheet and cash flow statement CALCULATIONS: Question 1 The Sydney Hospital provides a range of health care services and its payment terms are net 30 days, meaning payment from patients is due 30 days after their discharge from hospital. Suppose the following transactions take place: • March 5 - Patients receive health care services of $60,000 • March 10 – Patients receive health care services of $250,000 on terms of net 30 days. • March 15 - Patients pay $60,000 for health care services received on March 5. • March 30 - hospital pays $50

Robert · Accepted Answer

Answer 1- 
Part a) 
Profit and Loss Account - Accrual System 
  March April May  June   March April May  June 
Expenses 
 $ 
50,000.00  
 $    
91,000.00  
 $  
110,000.00  
 $  
100,000.00
Revenues  
 $  
310,000.00  
 $  
250,000.00  
 $  
200,000.00  
 $    
55,000.00  
Profit 
 $  
260,000.00  
 $  
159,000.00  
 $    
90,000.00  
 $  
(45,000.00)           
          Profit and Loss Account - Cash System 
  March April May  June   March April May  June 
Expenses 
 $    
50,000.00  
 $    
55,000.00  
 $  
206,000.00  
 $    
40,000.00
Revenues  
 $    
60,000.00  
 $  
250,000.00  
 $  
250,000.00  
 $  
255,000.00  
Profit 
 $    
10,000.00  
 $  
195,000.00  
 $    
44,000.00  
 $  
215,000.00
Part b) 
As per accrual basis, the most profitable month was March since maximum revenues have been 
earned in that month, even though the payment for the services was received in the next month. 
The expenses incurred in March are also lower as compared to other months resulting in higher 
Net Profits. 
Part c) 
Profit and Loss Account - Accrual System 
  Total   Total 
Expenses  $  351,000.00
Revenues   $  815,000.00  
Profit  $  464,000.00
Profit and Loss Account - Cash System 
  Total   Total 
Expenses  $  351,000.00
Revenues   $  815,000.00  
Profit  $  464,000.00
The Cumulative Profit in both the situations is same. The reason is that there are no revenues 
outstanding and yet to be receivable after June which have already been earned. In the same way 
all the expenses accrued have been paid by June and nothing is outstanding.
Answer 2- 
Part a) 
Income Statement 
 Particulars Amount 
Income from Department of Human Services  $      1,598.00  
Interest income   $          286.00  
Income from private practice   $      2,934.00  
Government grants  $  121,201.00  
Property income   $    13,342.00  
Other revenue  $      4,521.00  
Total Income  $  143,882.00  
  Administrative expenses   $      8,797.00  
Audit fees   $            92.00  
Drugs expense   $      8,440.00  
Fuel, light and power   $      1,246.00  
Medical supplies expense   $    13,965.00  
Other expenses   $      1,551.00  
Other staff expenses   $      3,398.00  
Patient fees   $    12,401.00  
Patient transport   $          223.00  
Salaries and wages  $    91,991.00  
Superannuation   $      5,825.00  
Repairs and maintenance   $      3,657.00  
xLaundry  $      2,631.00  
Total Expenses  $  165,286.00  
  Profit/Loss  $  (10,335.00)
Part b) 
Balance Sheet 
 Current Assets  Amount  
Cash at bank  $      3,249.00  
Debtors   $      2,961.00  
Food supplies   $      2,038.00  
Inventories   $          813.00  
Patient fees receivable   $      2,815.00  
Short-term Investments  $    35,435.00  
Non Current Assets 
 Property, plant and equipment  $  121,048.

The purpose of this assessment is to assess your understanding of the key financial concepts, your ability to apply this understanding to the interpretation of financial statements and to the...

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