Having been accepted in the management position of ABC healthcare organization, I am mandated to look at the position that the organization stands financially and subsequently write a financial analysis of the organization. ABC is a healthcare organization that provides health services to residents and receives funding from the regional healthcare authority. The organization is dedicated to promoting patient care and sharing scientific evidence from research. From the accounts section, I will request two main reports. These reports include a report on the organization’s statement of comprehensive income and the other will be a report on the financial position of ABC. In each of the reports, I will endeavor to cover what the report will tell me, the main areas of focus and the reasons for focusing on the areas.

Report on Comprehensive Income

A report that covers a statement of comprehensive income includes the sales or revenue for the organization less all the expenditures incurred when generating the sales. Therefore, from this, one knows whether the organization is profitable or makes losses. Thus, this report will help me gauge the performance of the organization. The main goal of every business including ABC health organization is to make profits, however at times it might make losses. Thus, it is imperative that the performance of a business organization in certain defined period be measured whether it is making losses or profits.

Why the Report?

, the report will ensure that the correct amount of tax is remitted to the authorities.

What to Look For

Accounts Adjustments

Before the accountant prepares the statement of comprehensive income for a given period, they must make adjustments to particular accounts in order for the profit and loss statement to show accurate results for profits and losses made. I will look at the adjustments and whether they have been done the right way. Some of the adjustments that I will look at include:

Prepayment Accounts

The prepaid accounts include both the prepaid incomes and expenses. For ABC, the insurance premiums, rent and rates are prepaid in nature given that they are paid for a year before the time. The prepaid incomes that I will look at include the income that is already received yet there has not been delivery of services or goods to that effect as the receiving of NHIF contributions for a year. Such incomes that are received before the time tend to be part of business liability given that the organization remains indebted to deliver the service already paid. Therefore, the accountant has to capture it under the current liabilities section of the balance sheet.

Accrual Accounts

These accounts impact on both the incomes and expenses. The accrued expenses represent the portion of expenses that have been used though not yet paid. A case example is the repairs done on the ambulances of ABC, which are paid for later, for example, 30 days later. The accrual accounts will also include services that cannot be determined in advance till their consumption, and they include water bills that are used by the Healthcare, telephone and electricity bills. Though it is noted that by the time the accountant might prepare final statements, a portion of the expenses will not have been paid given that the bills will not have been received. There is a need for such expenses to be recognized in the period in which they were incurred. Therefore, in the reports, I will look at whether the matching concept has been adhered to which postulates hat expenses should be matched with income.

Accrued Income

Bad and Doubtful Debts Accounts

Some of the sales or services offered by the healthcare organization would be made on credit. Thus, the healthcare organization takes a risk of some of its items ending up unpaid. The sales or services of the healthcare that are not paid form part of bad debts. An example would be surgery fees or even the ward fees after discharge of patients. These are common business expense as long as there is existence of sales or services offered. Such may arise due to the debtor refusing to pay a particular invoice, bankruptcy of a business enterprise, debtor refusing to pay part of the invoice.

Depreciation Accounts

Depreciation forms part of the original cost of fixed assets that are consumed during the period of use in the business. Depreciation can also be defined as the loss in value due to the use of an asset.

Discounts Allowed Accounts

Represent the amount allowed to a customer on their sales amount mainly given as an incentive for the bulk purchases or prompt payment. Discounts given on purchases or use of services are known as trade discounts. These accounts should be properly checked and ensure that the customers are appreciated for their purchases.

Discounts Received Accounts

This section represents cash discounts received by the healthcare organization when it pays the suppliers for the amounts that are outstanding. Discounts received accounts are given as an incentive to encourage customers to embrace prompt payment of the amounts owing to the suppliers.

Report on Statement of Financial Position

This statement shows the assets that a business has and the claims that can be made against the business’ assets thereof. The claims can be either through capital injection or liabilities to third parties. In looking at the report highlighting on the statements of financial position, I will ensure that the double entry rule has been followed, and the statement of financial position balances. The statement should be divided into two, the debit and credit side with the debit side representing the business assets while the credit side is representing liabilities and capital.

Assets

The assets include the economic resources that occur as a result of past activities and are in a position of bringing economic benefits to a firm in the future. The assets must be classified differently according to their categories, and they include non-current or long-term assets, current or fictitious assets. The long-term assets are those that are anticipated to bring benefits to the firm in more than one accounting period. They could be tangible or intangible. They should be clearly captured and recorded.

Current Assets

The assets in this category include those that are not to be consumed by organization in a period exceeding one accounting period. The benefits mainly spill within one accounting period, and they may include prepayments, debtors or cash at bank.

Liabilities

These are financial obligations that arise from agreements made in the past which are to be paid or redeemed in future accounting periods. The liabilities of the company must be in two categories current or non-current liabilities. Current liabilities are debts arising from ordinary trade activities and are expected to be settled within the next accounting period out current assets. Examples include trade creditors, accrued expenses, bank overdraft, and bills of exchange payable.

Non-Current Liabilities

These are financial obligations that an organization has undertaken to redeem or settle over a period that is more than one accounting period. The liabilities arise from events outside ordinary trading activities. Some of the non-current liabilities that must be captured should include bank loans, debentures, long-term bonds that are payable and long-term leases.

Capital or Equity

It usually represents the amount that is contributed by the business owners. In the case of ABC, capital refers to preference share capital or even ordinary share capital. The equities should be captured in the accounts properly.