Select two different types of HCOs and comment on the most positive and most negative effects of using the cash versus accrual accounting method for the business.

The two types of Health Care Organizations (HCOs) that I will be discussing are hospitals and physician’s practices. Hospitals generally have larger operations than a physician’s practice, so the effects of using cash versus accrual accounting may differ between the two.

One of the most positive effects of using cash accounting for both types of HCOs is that it simplifies record keeping since income and expenses are recognized when they are received or paid out instead of when earned or incurred. This can provide a clearer picture as to how much money is available at any given time which makes budgeting easier and helps prevent overspending. Additionally, this method may also offer more favorable tax implications since taxes may not need to be paid until all invoices have been settled.

On the other hand, one of the biggest drawbacks associated with using cash accounting is that income and expenses cannot be reported in their correct period due to recognition being deferred until receipt/payment. This means that profits can appear artificially high in certain periods while actual losses from other activities remain hidden until later on which could lead to potential confusion or even manipulation if not properly monitored.

Overall, for both hospitals and physician’s practices there are benefits and drawbacks associated with either method; however it is important for each organization to evaluate their individual circumstances before deciding which approach best aligns with their goals.