Example 1 - Not-for- Profit Organization: Hospital/Health Care, Revenues.

A hospital has three revenue-controlling accounts: Patient Service Revenues, Other Operating Revenues, and Non-
operating Revenues.
1. State in general terms the type of revenues found in each controlling account.
2. Indicate into which of the three controlling accounts each of the following would be placed by using the
symbols PS for Patient Service Revenues, OO for Other Operating Revenues, N for Non-operating Revenues,
and N/A if not a revenue item:
a. Tuition for entry to the nursing school. __________________
b. An unrestricted gift of cash. __________________
c. General nursing fees charged to patients. __________________
d. Charges for physicians’ care. __________________

e. A restricted gift used for research on genes. __________________

f. Dividends from hospital’s investments. __________________
g. Revenues from gift shop sales. __________________
h. Patient room and board charges. __________________
i. Proceeds from sales of criteria meals. __________________
j. Recovery room fees. __________________
k. Contributions for plant replacement and expansion. __________________

Example 2 – Not-for- Profit Organization: Hospital/Health Care, Revenues, Expenses, Contributions.

Record the following events of St. Paul Hospital:

1. Patients were billed for the following gross charges:
Room and board P680,000
Physicians’ care 220,000
Laboratory and radiology 110,000
2. A donation of drugs with a fair value of P12,000 was received from a doctor. The drugs are normally purchased.
3. Revenues were reported from:
News stand and snack bar P15,800
Parking lot charges 3,200
Vending machines 9,800
4. A charity allowance of P13,000 was granted to indigent patients.
5. Contractual adjustments granted to patients for Medicare charges totaled P68,000.
6. The hospital recorded an increase in the provision of P26,000 for uncollectible receivables.

Example 3 – Not-for-Profit Organization: Hospital/Health Care, Journal Entries, Revenue and Cash Flow

The following transactions (a-e) took place in Brook Private Hospital during the year ending December 31,20x1:
a. Gross revenues of P8,500,000 were earned for service to Medicare patients.
b. Expected contractual adjustments with Medicare, a third-party payor, are P3,700,000; and allowance for
contractual adjustments account is used by Brook.
c. Medicare cleared charges of P8,500,000 with payments of P4,460,000 and total contractual allowances of
P4,040,000 (P3,700,000 + P340,000).
d. Interim payments received from Medicare amounted to P250,000.
e. The hospital made a lump-sum payment back to Medicare of P90,000.

Required:
1. Record the transactions in the general journal.
2. Calculate the amount of net patient service revenues.
3. What is the net cash flow from transactions with Medicare?
4. What adjustments must be made at year-end to settle up with Medicare and properly report the net patient
service revenues after this settlement?
Example 4– Not-for-Profit Organization: Hospital/Health Care: Statement of Activities.
Pure Air Rehabilitation Hospital has the following balances that are extracted from its December 31, 20x9, trial
balance:

Account Debit Credit

Nursing Services Expense 230,000
Professional Fees Expense 340,000
General and Administrative Expense 150,000
Depreciation Expense 90,000
Interest Expense 13,000
Asset Whose Use Is Limited 55,000
Repairs and Maintenance Expense 110,000
Provision for Uncollectible Accounts 14,000
Contractual Adjustments 26,000
Patient Service Revenues 740,000
Child Day Care Revenues 15,000
Parking Fees 4,500
Endowment Income – Temporarily Restricted 120,000
Interest Income – Unrestricted 3,000
Donations – Temporarily Restricted 18,000
Gains (Distributable) on Sale of Endowments – Temporarily Restricted 56,000
Net Assets – Unrestricted (January 1 ,20x9) 800,000
Net Assets – Temporarily Restricted 755,000
Net Assets – Permanently Restricted 750,000
Required: From the above information, prepare a statement of activities for this year ended December 31, 20x9