Question

Which of the following is true regarding the reporting of expenses by private sector, not-for-profit hospitals?

A. All expenses are considered reductions in unrestricted net assets.
B. Expenses must be reported by natural (i.e. salaries, supplies, etc.) classification in the statements.
C. Both of the above.
D. Neither of the above.

Answer 1

Expenses at not-for-profit hospitals must be reported by their natural classification, meaning they are categorized based on their nature such as salaries or supplies.

Step-by-step explanation:

The question at hand involves the reporting of expenses by private sector, not-for-profit hospitals. The correct response is B: Expenses must be reported by natural classification in the statements. This means that expenses should be categorized according to their nature (e.g., salaries, supplies, etc.) rather than by their function (e.g., research, administrative, etc.). This provides clarity and uniformity in how profit and non-profit organizations record and report their financial transactions, which is instrumental for accountability and financial analysis.