One of the financial statements that George Mason Surgical Associates will require, on monthly basis, is the income statement. An income statement is a financial statement, which indicates the total revenues collected and total expenses incurred within a given period (Financial Reporting Requirement, 2011). The association will require this statement since, of the need to determine on possibilities of incurring a deficit or a surplus from its operations. An income statement will be important for this association because it will be involved in collecting revenue charged from patients, whereby, various expenses will be incurred, whilst serving the patients.
The association will also require a balance sheet on monthly basis. A balance sheet will provide the association’s members with information concerning the net-worth of their operations on a monthly basis. This will include the total value of assets, and the total value of liabilities. The rationale behind the choice of the balance sheet is that, the association will be required to present a statement of its financial position (Financial Reporting Requirement, 2011). This is a financial requirement for all associations, which is important for audit purposes. This statement will be of importance to George Mason Surgical Associates because it will enable them to track their progress in terms of their net-worth on monthly basis. Since a balance sheet provides information about the current financial position of the business/association, it can be useful in making decisions on matters concerning financing of the association (Financial Reporting Requirement).
The relationship between an income statement and a balance sheet is that, they are both financial statements, which are required at the end of every reporting period for auditing purposes (Financial Reporting Requirement, 2011). The key element that relates to these financial statements is retained earnings. A surplus or a deficit from the income statement causes either an increase or a decrease of the retained earnings in the balance sheet.
Accounts receivable statement indicates the total amounts owed to a business/association by its clients. Since George’s Mason surgical Associates will be dealing with provision of surgical services to the patients, it will experience instances where some of its clients will not to meet surgical expenses on promptly. Therefore, the association will require an accounts receivable aging report. Accounts receivable aging report indicates the amounts owed to a business by its clients, and the length of time that those amounts have been outstanding (Murray, 2011). Normally, accounts receivable aging report classifies all clients’ debts as follows: current (those that are due within seven days), 30 days (due within 30 days), 90 days (due within 90 days), and 120 days and over (Murray, 2011). This report will be important for George Mason Surgical Associate because it will assist in tracking the debt repayment patterns of the clients. Moreover, the association will be able to know the debts that need to be dealt with on urgently (those that are long overdue).
Key ratios, which relate to accounts receivable to be presented to the association include, accounts receivable turnover ratio and current ratio. Accounts receivable turnover ratio will measure the association’s “effectiveness in extending credit to its clients and in collecting its debts” (Receivable Turnover Ratio, 2011). Current ratio will measure the association’s ability to meet its current liabilities using its current assets.
The most appropriate statistical report relating to financial statements necessary for the association is the inventory report. An inventory report will be necessary in preparation of both statements. In the income statement, an inventory report will be used to determine the cost of goods used in provision of surgical services to the clients. In the balance sheet, an inventory report will be used in determining the value of supplies that will be in the store at the end of every reporting period.
A compensation plan is an outlay of how employees are remunerated in accordance with their qualifications, experience, expertise, and easiness of the job they perform (Lawrence et al., 2011). A good compensation plan should include the basic pay, annual incentive plan, employees’ bonus plans, long-terms incentive plans, and perquisites. Basic pay is the amount earned by an individual employee on monthly basis before any deductions are made. A good compensation plan should indicate the basis for determination of the basic pay for every ob group. Annual incentives are the additional payments made to employees on basis of merit such as outstanding performance, or good decision-making ability. Employees’ annual incentive plans assist in motivating the employees, and hence retention of employees in the organization. Bonus plans provide for rewarding of employees after an organization has recorded good profits. Long-term incentives include plans such as retirement benefits, pension schemes, and stock option plans. Perquisites include benefits such as motor vehicle use allowances, employment contracts, or retirement plans for executives. Bonus plans, perquisites, and long-term incentive plans act as motivating factors for the employees (Lawrence et al., 2011).
An executive summary report is a monthly report, which summarizes the key information for a specific department in an organization. The financial elements that can be included in George Mason Surgical Associate’s executive summary report are total monthly revenues, total monthly expenditures, and the total net worth (total of the balance sheet). This would be useful in assessing the financial performance of the association. Statistical elements would include liquidity ratios and accounts receivable turnover ratio. These ratios will help the management of the association to assess the association’s ability to meet its short-term financial needs (Financial Reporting Requirements, 2011).