Lettice Johnson

Brookstone Ob-Gyn Case Report

The profitability of Brookstone Ob-Gyn is the primary issue in this case. Despite all indications pointing to BOGA's success, the business has been running at a loss, according to its documents. This is a problem diagnosis case. In The Brookstone Ob-Gyn Associates scenario, DR. Mark Amsted cannot pinpoint the causes of the cash loss in the previous year's operations, despite the company's rising sales and profitability. A student may do everything right to succeed at a high level yet still receive ordinary grades. To understand the cause of the failure, the student needs to take a self-evaluation test. This is comparable to the BOGA dilemma. The company has been conducting business effectively, as revealed by its financial documents. However, the business has been functioning with a cash shortfall. In the early months of 2001, the hospital's revenue increased significantly with the implementation the accrual basis accounting policy. However, the hospital's credit line of $300,000 was nearly depleted by the end of June 2001, resulting in severe cash flow issues.

According to Dr. Amsted, for instance, the projected liability of BOGA to the Dean under the modified accounting technique would be $428511 of the $3895553 revenue collected rather than $558615 of ($5078320) of the total anticipated revenue for the year. This is not a genuine reflection of the hospital's financial situation. Under the accrual accounting method, the income statement reveals net revenue of $3895553 rather than $5078320, which reflects an increase in revenue of nearly 39% compared to the modified cash accounting method. From the figures shown in modified cash accounting financial statements and the financial statements derived from the accrual basis accounting, the operation statement indicates that BOGA earned a higher profitability of $246287.80 throughout the year. These findings contradict the $85 0000.00 shortfalls the modified cash technique estimated. From these findings, one can conclude that the modified cash accounting technique does not fully reflect the hospital's financial health. BOGA needs more than just $300000 to cover its operation costs.

I recommend that Dr. Amsted should use the hospital's accrual basis accounting policy instead of relying on a modified cash accounting policy. Although cash accounting is simpler, it does not effectively let BOGA realize how profitable the company's operations were during the year. Companies need to maintain a balance between their annual earnings and costs. With the Accrual accounting method, Brookstone Ob-Gyn Associates can evaluate if providing...