On the statement of operations prepared for a private,not-for-profit hospital,patient service revenue earned during the year is reported net of amounts for which of the following items?
I.Contractual adjustments
II.Bad debts expense
A)I only
B)II only
C)I and II
D)Neither I nor II

Question

Quizplus · Accepted Answer

Patient service revenue earned during the year is reported net of contractual adjustments, which reflect the difference between the amounts the hospital charges for services and the lower amounts it receives from third-party payers, such as insurance companies. In contrast, bad debts expense is a separate expense item that reflects the amount of patient service revenue that is unlikely to be collected due to the inability or unwillingness of patients to pay. Therefore, it is not reported as a reduction of revenue.

On the Statement of Operations Prepared for a Private,not-For-Profit Hospital,patient