Statement and Balance Sheet

Compare and contrast the income statement and balance sheet. 2. How are the statements organized (e.g., revenue vs. expense, assets vs. liabilities, etc.) and how are they different (e.g., period of time [year vs. snapshot]) from one another? 3. As a nurse leader (nurse practitioner), how can you use these statements to provide value for your organization? Reply to discussion post below by additional information to substantiate their post. Questions 1 and 2 The income statement also known as the profit and loss statement (Turtle, 2011), is a financial report that summaries the profits and losses of an organization, specifically from revenue, either net or gross, and organizational operating expenses. It is a flow type statement, typically representing a period, such as a month, quarter or a year. The Bionic Turtle further explains that in an income statement “revenue and expensed are recognized independently of cash movement”, using an accrual methodology. (Turtle, 2011) Simply stated, an income statement demonstrates revenue – expenses = net income of a facility, or the bottom line. Revenue in a healthcare organization is generally related to the amount billed for providing patient care, and the amount paid for providing patient care. The expenses that are included in an income statement include employee salaries and benefits, supplies and provisions for bad debt, or unpaid care, and any other overhead associated with the running of the organization (Leger & Dunham-Taylor, 2018). A balance sheet, in contrast, looks at the assets of an organization, it’s liabilities and it’s equity at moment in time, usually the beginning of the year and the end of the year, a snapshot in time (Leger & Dunham-Taylor, 2018). It summarizes the assets of the organization with the liabilities and the equity of the organization. Liabilities are related to borrowing of monies or using lines of credit to purchase or grow the organization to add assets. Equity is related to the monies that are invested into the organization and the profit those monies make to provide a safety net for the organization. For a balance sheet to be beneficial, the total assets should equal the sum of the total liabilities plus the equity of the organization. The organizations equity is the “balancing” component, reflecting the organization’s net worth (Meek, 2015). Question 3 As a nurse leader, and a department manager, I have learned to understand income statements and balance sheets and how my department budget fluctuates with the income statement. Our organization is very proactive in involving nursing in understanding the impact that financials have on the organization and our budgeting related to staffing, supplies, insurance contracts and charity care. Department leaders meet quarterly with the finance division to review budgets and current financial data to make sure that budgets are adjusted to promote a health financial picture for our organization and adjust for any significant changes in staffing, patient volumes or supply charges that could affect how care is delivered, which could impact our reimbursements. Having had the opportunity to be involved in working closely with finance, I as a nurse leader have a much greater understanding of how efficiency in care and staffing in my department help to improve our financial bottom line, and help me to explain variances in budget related to care or staffing or census.

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