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Free AHM-520 Exam Braindumps (page: 25)

Page 24 of 55
PDF with 215 Questions

One true statement about cash-basis accounting is that

  1. Cash receipt, but not cash disbursement, is an important component of cash-basis accounting
  2. Most companies use a pure cash-basis accounting system
  3. Cash-basis accounting records revenue according to the realization principle and expenses according to the matching principle
  4. Health insurance companies and health plans that fall under the jurisdiction of state insurance commissioners must report some items on a cash basis for statutory reporting purposes

Answer(s): D



With regard to the financial statements prepared by health plans, it can correctly be stated that

  1. both for-profit, publicly owned health plans and not-for-profit health plans are required by law to provide all interested parties with an annual report
  2. a health plan's annual report typically includes an independent auditor's report and notes to the financial statements
  3. any health plan that owns more than 20% of the stock of a subsidiary company must compile the financial statements for the health plan's annual report on a consolidated basis
  4. a health plan typically must prepare the financial statements included in its annual report according to SAP

Answer(s): B



The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.

The main purpose of Caribou's balance sheet is to

  1. Reveal how Caribou obtained particular assets or liabilities
  2. Show how much money Caribou has realized from its operations during an accounting period
  3. Measure the owners' wealth
  4. Reconcile the cash that Caribou has on hand at the beginning and at the end of an accounting period

Answer(s): C



The Caribou health plan is a for-profit organization. The financial statements that Caribou prepares include balance sheets, income statements, and cash flow statements. To prepare its cash flow statement, Caribou begins with the net income figure as reported on its income statement and then reconciles this amount to operating cash flows through a series of adjustments. Changes in Caribou's cash flow occur as a result of the health plan's operating activities, investing activities, and financing activities.

The basic formula for Caribou's income statement is

  1. Cash Inflows ­ Cash Outflows = Net Cash Inflow (Outflow)
  2. Revenues ­ Expenses = Net Income (Net Loss)
  3. Sources of Funds ­ Uses of Funds = Net Change in Cash
  4. Assets = Liabilities + Owners' Equity

Answer(s): B






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