Business of Radiology 101

Balance Sheet

A balance sheet also known as a statement of financial condition seeks to represent all of the company's property, product, and equipment and show it in relation to the money the company owes and the equity of the organizations financial backers. The balance sheet is formally governed by the relationship: Assets = Liabilities + Equities In many cases this equation is displayed graphically by placing assets in a column on the left of the sheet and liabilities and equities in a column on the right and showing that these two columns are equal. This equation can be thought of as a balance between the practices items of value (inventory, scanners, facilities, etc.) and the means by which all of them were acquired (loans, capital, etc.). So when one side of the balance sheet is changed an adjustment to the contralateral side shows the new asset or how it was financed.

This statement is useful to a radiology practice in a variety of ways. A balance sheet helps demonstrate the financial health of a practice to its owners or partners. It can also be used by a potential creditor to assess the practice and evaluate its ability to repay a loan.

The matching principle states that the costs incurred providing a service are added to the balance sheet only when they are accrued. So, if a practice buys several months worth of iodinated contrast material or injector supplies, only the cost of the supplies used up to the date on the balance sheet is reported. Thus expenses and revenues are recorded as they are accrued not when money changes hands. This process allows for better evaluation of a group’s expenses relative to the services produced.

One fundamental difference of the balance sheet compared to the other financial statements is that it represents the financial standing of an organization at a single point in time, and not over a period. The time point studied should be clearly defined at the top of the balance sheet. To understand this equation each term will be described in greater detail individually.

				Period ending:		3/30/14					(all values represent 1,000's of $)
Total Assets					$ 5,000			Total Liability & Equity					$ 5,000
	Total Current Assets			$ 330					Total Liabilities			$ 3,450
		Cash		$ 50						Current Liabilities		$ 50
		Accounts Receivable		200							Accounts Payable	30
		Inventory		80							Accrued Liabilities	20
	Total Noncurrent Assets			4,670						Long-term Liabilities		3,400
		Net book value		3,420							Equipment Loans	2,000
			Scanners & Equipment	3,000							Building Mortgage	1,400
			Buildings	820
			Accumulated depreciation	- 400					Total Equity			1,550
		Land		1,250						Dr. Hamurabi's Equity		500
										Dr. Solomon's Equity, A		250
										Dr. Solomon's Equity, B		250
										Dr. Nebakanezer's Equity		500
										Retained Earnings		50