You have been given the following list of accounts and cost

You have been given the following list of accounts and cost centers for a group of physician offices that you manage. The accounts are in alphabetical order. Create a numbering system for a chart of accounts using a 5-digit numbering system that incorporates the main categories of Assets, Liabilities, Equity, Expenses, and Revenues. You will have sub-accounts under these main headings. You will have to determine if the accounts are considered Assets, Liabilities, Equity, Expenses, or Revenues and indicate that in your file. Provide the definition of each. The cost centers represent the various physician office sites and will be indicated by a modifier.

For example, let’s assume you have salaries as an expense.   Your numbering system states that all expenses have a 5 digit code starting with 30. Salaries would be indicated by 30100. You could then breakdown salaries by type such as clerical: 30101 or physician’s assistant: 30102. You will indicate the three cost centers through a two digit modifier. So, a physician’s assistant salary at the Bedford Clinic would be 30102-01 and a physician’s assistant salary at the Simon Clinic would be 30102-02. Provide an explanation of how you set up your chart of accounts. (10--includes definitions and explanation)

The following is the list of accounts and cost centers from which to create your numbering system. You are to create your chart of accounts in Excel. You may want to research some existing charts of accounts to see how to set them up. (40)

Accounts

Cost Centers

Accounts payable - general

Bedford Clinic

Cash - investment account

Simon Clinic

Cash - money market

Morgan Physician Group

Coding expense

Collection agency income

Common stock

Computer supplies

Dues - professional

Medicare tax payable

Office supplies

Professional (PC) billing revenue

Retained earnings

Salaries - management

Salaries - staff

Essay Questions:

Why is it important to establish a chart of accounts? Provide at least three examples of accounts that may be present in a physician office setting, but not in a hospital setting. Explain why that would happen. (20)

Here are two examples of ways to set up your chart of accounts.

60100

Bonds

Assets

   

60200

Stocks

Assets

70100

Reserves

Liabilities

60000

Assets

Bonds

Stocks

Liabilities

70100

Reserves

Accounts		Cost Centers
Accounts payable - general		Bedford Clinic
Cash - investment account		Simon Clinic
Cash - money market		Morgan Physician Group
Coding expense
Collection agency income
Common stock
Computer supplies
Dues - professional
Medicare tax payable
Office supplies
Professional (PC) billing revenue
Retained earnings
Salaries - management
Salaries - staff

Solution

Code 1 Assets 60000 Bonds 60100 Cash - investment account 60200 Cash - money market 60300 Computer supplies 60400 Office supplies 60500 2 Liabilities 70000 Common stock 70100 Retained earnings 70200 Medicare tax payable 70300 Dues - professional 70400 Accounts payable - general 70500 3 Income Account code Cost centr code Collection agency income 40100 Professional (PC) billing revenue 40200 4 Expenses Salaries - management 30101 30101-01 Salaries - staff 30102 30102-01 Coding expense 30200 30200-01