Title Head: ACCOUNTING AND HEALTH CARE FINANCING
The difference between accounting and finance is that accounting deals with the process of methodically or precisely recording assessing and recording financial deals as well as a transaction concerning a business. Accounting can further be described as a process that involves preparing statements and declarations that have to do with business regarding its assets, liabilities and, to an extent, the outcomes of its operations. Finance deals with the efficient management of assets as well as liabilities (Stockamp, 2004). Accounting and finance are two fields which have a close relationship yet they a very different from each other. There are differences between the two which make them distinct from each other.
The difference between financial accounting and managerial accounting is that managerial accounting is actually that branch of accounting which specializes mainly with financial reports which are confidential and which are meant to be used exclusively by an organization’s top management. Managerial accounting is meant for the use of the members of an organization. The reports of managerial accounting are therefore confidential and are to be seen by a limited number of people who must be at the management level within an organization. The preparation of the reports for managerial accounting is done using scientific as well as statistical means aimed at arriving at some specific monetary values (Shelton, 2010. They are used for the purposes of making decisions within an organization. Feasibility studies, sales forecasting reports, comparative analysis, budgetary analysis and many others are examples of managerial accounting reports.
Financial accounting is meant for the use of the people outside an organization or a company. The reports of financial accounting are prepared for a specified period of time, for example a fiscal year. These reports are factual and they possess a predictive value and people wishing to make decisions of a financial nature as well l as investment in an organization can use them. In making financial reports, people specialize on profitability, solvency, liquidity, stability and others and the reports can be accessed by anyone inside the company as well as those outside for example stake holders. It is a legal requirement that companies must make financial statements but as the case with managerial accounting it is not compulsory. Companies must prepare financial statements aimed at the general public, at a certain interval so that stakeholders can stay updated.
The relationship between financial risk and financial return lies in what an organization stands to lose or gain from securities or investments. Risk implies that an investor stands to lose what he or she has invested, more specifically money, while return implies that the investor can get some profit from investing his or her money in an organization (Stockamp, 2004). For investors who invest securities that are low, it implies that the risks are low and as a result the returns are going to be small. If investors invest in securities that carry a high risk therefore the potential for the investors to lose is higher. The returns that they stand to get are also a lot higher compared to investing in low risk securities (Shelton, 2010).
The U.S. health care system is considered complex because it is very highly commercialized and health care professionals work on a performance based scheme. The income generated from the customers is also very high. Contributors are extremely overwhelming. Very many people in the U.S are contributors to some hospital insurance scheme. However, it is very unique, especially due to its strengths as well as weaknesses that are brought about by vested interests. The health care system of the U.S presents a very strange case, between the young and the old. The aged are in more need of medical services while the young do not need medical services that much and a majority can stay without. The health care system of the U.S is very highly commercialized the health care providers are more interested in achieving more efficiency in their efforts to provide their services to the needy.
Health care organizations get paid based on their established charges because the customer who pays for their service will finally get what the hospital can offer and therefore if a healthcare provider can not charge basing on others in the health care provision industry and yet not provide that kind or quality of services.
This means that the hospitals which have complicated healthcare systems do charge more for medical consultation and services. Hospitals that charge a low fee attract the people who earn less.
In healthcare organizations, charges are not reported as revenue because these health care organizations are reluctant to let their clients to know the amount of money that they are making. They have profit margins that are just too high and it would be chaos if the clients knew (Stockamp, 2004).
The health care providers who do not have insurance provision for clients would start their own schemes and charge too highly. Many write offs in insurance statements are caused by an overcharge by health care providers.
Shelton, D. S. (2010). Breast cancer patients struggle with cost of treatment. McClatchy – Tribune Business News. Retrieved October 16, 2010, from ABI/INFORM Dateline.
Stockamp, R, (2004). Health Care Financial Management. Stockamp and Associates.