- 14 -
Accounting Issues–Background
It is a customary and accepted practice in the health care
industry for health care practitioners to use the cash method of
accounting. PC used the cash method of accounting for both
income tax purposes and for bookkeeping purposes and consistently
reported the drugs used in patient treatments as supplies and not
as inventory. With the exception of its Federal income tax
return for 1993, Mid-Del used the cash method of accounting for
income tax purposes and consistently reported the drugs used in
patient treatments as supplies and not as inventory. Mid-Del
used the accrual method of accounting for bookkeeping purposes.
PC reported the following gross receipts, direct costs
associated with patient treatments, and gross profit for the
taxable years ending April 30, 1993, 1994, and 1995, using the
cash method of accounting:
TYE Gross Other costs Gross Medical supplies and Medical
receipts1 profit drugs included in supplies and
other costs drugs as a
percentage of
gross receipts
04/30/93 $1,519,988 $425,554 $1,094,434 $183,136 12
04/30/94 2,106,670 454,982 1,651,688 367,793 17
04/30/95 2,100,440 513,006 1,587,434 451,976 22
1 Net of returns and allowances.
Page: Previous 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 NextLast modified: May 25, 2011