This document provides an overview of key health information standards and coding systems used in healthcare, including:
- Medical coding sets like ICD-10-CM and HCPCS/CPT are used for diagnoses, procedures, and billing. Government regulations like HIPAA set rules for secure transmission of coded data.
- Coding can be classification-based (like ICD) which relates codes in a hierarchy, or nomenclature-based (like CPT) where each code defines a unique term.
- Specific coding systems discussed include ICD-10-CM for diagnoses, HCPCS which has CPT Level I codes for procedures and Level II codes for other services/products, and requirements for code set
CMBA 603-SName ___________________________Test 1 – part 2 (prob
1. CMBA 603-S Name ___________________________
Test 1 – part 2 (problems)
Fall 2021
Problems – Work the following either by completing the
answers on this document or else by using Excel. Be sure to
show your work! This is an open-book, open-notes test. You
may not use the internet or consult with other people, but you
may use our textbook and notes from this class. Both parts of
the test are due at midnight, Monday, September 27. Upload
your files to Canvas.
Classifications: Part I
For each of the following accounts, state (a) the specific type of
account (asset, liability, revenue, etc.) (b) the normal balance –
debit or credit and (c) whether it would be closed (as part of the
year-end closing entries).
(a) Type of Account (b) Debit or Credit? (c) Close?yes or
no
1. dividends payable __________________ ______
______
2. purchase discounts lost (periodic) ____
3. accumulated depreciation __________________ ______
______
4. common stock __________________ ______ ______
5. cost of goods sold __________________ ______
______
6. dividends (declared) __________________ ______
______
7. interest earned __________________ ______ ______
8. depreciation for the current year __________________
______ ______
9. accounts receivable __________________ ______
______
2. 10. retained earnings _________________ ______
______
11. prepaid (unexpired) insurance __________________
______ ______
12. sales returns __________________ ______ ______
13. gain on sale of land __________________ ______
______
14. investments __________________ ______ ______
15. unearned rent revenue __________________ ______
______
Classifications: Part II
State the impact on net income in the current month under the
accrual method (increase, decrease, or no effect)
Impact on Net Income
1. recorded interest on a note receivable; the
interest and note will be received next month
__________________
2. collected a deposit on a sale of goods that
will be delivered next month __________________
3. paid cash dividends that were declared last month
__________________
4. purchased inventory for cash (perpetual system)
__________________
5. sold land for more than its cost __________________
6. recorded this month’s depreciation __________________
7. updated unearned rent revenue by moving
the current month’s rent to the appropriate account
__________________
8. purchased a building by signing a mortgage
payable and also giving a cash downpayment
__________________
9. accrued utilities for the month (to be paid next month)
__________________
10. recorded the expiration of this month’s
3. portion of prepaid insurance __________________
11. signed a purchase order for goods to
be received next year
__________________
12. issued bonds payable
__________________
Problem 1 Recording Transactions Able Co. began operations in
December 2021 with the following transactions occurring in that
month. Note that there are no beginning balances in the
accounts because this is the first month of operation.
a. Sold shares of the company’s stock for $430,000 cash.
b. Purchased land worth $60,000 and a building worth
$90,000, paying a $20,000 down payment and signing a note
payable for the remainder.
c. Performed services for $235,000 on credit.
d. Purchased supplies on account for $12,400.
e. Paid $36,000 for a two-year insurance policy.
f. Received $120,000 cash payment for the services
previously performed on account.
g. Paid wages to employees for $48,000 (not previously
recorded).
h. Declared dividends to stockholders of $20,000.
i. Recorded $1,200 depreciation on the building.
j. Recorded the use of one month of insurance (see part e
above).
4. k. Paid the dividends that were declared in part h above.
l. Determined that ending supplies on hand at December 31
were $1,800. Recorded the use of supplies for the month.
m. Recorded the utility bill of $2,300 for December’s utilities;
the bill will be paid next month.
n. Recorded taxes at a tax rate of 30% (Hint: Do the income
statement to determine the dollar amount for this entry).
Required:
1) Prepare journal entries for each of the above transactions.
Omit explanations.
2) Prepare an income statement, balance sheet, and statement of
cash flows for December. Assume a tax rate of 30%. (For the
statement of cash flows, it may be easiest to prepare a T-
account for tax and then determine where each increase and
decrease in cash would go in the statement).
Problem 2 Comprehensive Problem Benton Company has made
adjusting entries for January through November, but not
December. The company only prepares closing entries at the end
of the year. The accounts from its unadjusted trial balance on
December 31 (the end of its fiscal year) are shown below in
alphabetical order. Assume that each account has its normal
balance of debit or credit.
December 31, 2021
Accounts Payable
6,900
Accounts Receivable
9,400
Accumulated Depreciation—Equipment
1,200
5. Cash
11,800
Common Stock
18,000
Depreciation Expense
1,200
Dividends
5,800
Equipment
16,000
Insurance Expense
1,500
Notes Receivable
9,000
Prepaid Insurance
2,500
Rent Expense
12,000
Rent Revenue
14,400
Retained Earnings
14,100
Salaries and Wages Expense
18,100
Service Revenue
34,600
Supplies
700
Supplies Expense
1,800
Unearned Rent Revenue
600
a. According to a physical count, the supplies on hand at
December 31 are $360.
b. The company purchased an 8-month insurance policy for
6. $4,000 on September 1.
c. The company accepted a note receivable from a customer on
December 1 of the current year.
The note has an annual interest rate of 6%, and the note and
interest will be received on May 31 of next year.
d. The balance in unearned rent revenue is from a $3,600 check
received on February 1 of the current year for 12 months of
rent.
e. Rent earned, but not yet recorded, at year-end is $1,600.
f. The equipment was purchased on October 1 of the current
year and has an expected salvage value of $1,600. The estimated
useful life is 2 years.
g. Additional dividends declared, but not yet recorded (to be
paid next month) are $2,400.
h. Service revenue earned, but not yet recorded, is $6,700.
Required:
1) Prepare all necessary adjusting journal entries for the month
of December. (You may also want to do T-accounts, but they
are not required).
2) Prepare closing entries for the year.
3) Prepare an income statement for the year.
4) Prepare a balance sheet as of year end (December 31). Be
sure to update all accounts (including retained earnings) for the
adjusting and closing entries!
Problem 3 Adjusting Journal Entries
Prepare December 31 (fiscal year-end) entries for each of the
following (unrelated) items. Assume that no monthly adjusting
entries have been made. All adjustments are made at year-end.
T-accounts may help!
a. The company had a beginning balance of $2,400 in supplies
on hand. During the year, $6,800 of supplies were purchased
and recorded as supplies on hand (also known as supplies
inventory). At the end of the year, supplies on hand were
7. $3,400 (according to a physical count).
b. The company paid rent of $360,000 for 2½ years on
September 1 of this year.
c. The company received rent of $180,000 for 3 years on March
1 of this year.
d. Before adjustment, the company shows accumulated
depreciation of $32,000 on its equipment. The accountant
determines that the amount of depreciation for the current year
is $7,600.
e. The company signed a $70,000, 9% note payable on May 1.
The note and interest are due January 31.
f. The company pays employees each Friday. December 31 fell
on a Tuesday, so the company has incurred salaries of $2,800
that have not yet been recorded.
g. On December 31, the company entered into a $90,000
agreement to provide services to a new customer, with the
services to start next year on January 5.
h. (This one is different – think about it!) The company had a
beginning balance of $1,400 in supplies on hand. During the
year, $8,700 of supplies were purchased and recorded as
supplies expense (because they thought the supplies would all
be used up by year-end). At the end of the year, a physical
count determined that supplies on hand were $2,800.
1) Compute the amount of supplies actually used
2) What is the correct ending balance of supplies on hand
(inventory)? ______________
3) Prepare the adjusting journal entry needed to arrive at the
correct ending balances in supplies expense and supplies on
hand.
Problem 4 Merchandise Transactions Elite Enterprises entered
into the transactions listed below:
1 Purchased merchandise from Celeste Co. on credit for
8. $14,000, terms 2/10, n/30.
6 Purchased $12,400 of merchandise from Ace Co. on credit
(no discount offered).
7 Paid for half of the goods purchased from Celeste (on July
1). Received the appropriate discount.
8 Returned $2,000 of the items purchased on July 6.
9 Paid freight charges of $240 on the items purchased July 6.
12 Sold merchandise on credit to Light Co. for $8,700. The
merchandise had an inventory cost of $6,400.
14 Of the merchandise sold to Light Co. on July 12, $800 of it
was returned. The items had cost the store $500.
16 Received payment from Light Co. for the balance ow ed.
17 Paid Ace Co. the balance owed.
22 Paid Celeste the balance owed (purchased on July 1),
receiving no discount.
Required: Don’t forget returns when you pay balances!
1) Prepare all journal entries for July for Elite Enterprises,
assuming the use of the perpetual inventory system.
2) Prepare all journal entries for July for Elite Enterprises,
assuming the use of the periodic inventory system.
9. HTH 1304, Health Information Technology and Systems 1
Course Learning Outcomes for Unit III
Upon completion of this unit, students should be able to:
4. Differentiate various health information standards in terms of
their ability to support the requirements
of a health care enterprise.
4.1 Explain specific health care coding sets used in the
nomenclature and classification of medical
diagnoses.
4.2 Outline government regulations regarding health care coding
sets.
5. Identify health information technologies necessary for
effective data storage and use in health care
organizations.
5.1 Describe the interoperability required in the transmission of
diagnostic information.
Course/Unit
Learning Outcomes
Learning Activity
10. 4.1
Unit Lesson
Chapter 5
Unit III PowerPoint Presentation
4.2
Unit Lesson
Chapter 5
Unit III PowerPoint Presentation
5.1
Unit Lesson
Chapter 5
Unit III PowerPoint Presentation
Required Unit Resources
Chapter 5: Coded Data
Unit Lesson
Medical coding is an essential piece of the patient discharge
process as it completes one stage of the health
care delivery process and gets the ball rolling into the next
stage. Coding is defined as the assignment of
character values that are grouped in certain ways to identify
specific diagnoses and procedures (Davis &
LaCour, 2017). While the primary use for medical coding is
medical billing, including payment and
reimbursement, this coding data can also be used for a multitude
of other reasons. Coded information can be
used to determine trends in diagnoses that, in turn, help with
forecasting and planning. Having this type of
11. information at their disposal, health professionals can
strategically prepare to fight off an epidemic or even
prevent one from occurring. Not only can medical coding data
be used for research, but it can also be used in
other nonclinical ways such as measuring outcomes for audit or
assessment purposes, reporting required
information to accrediting bodies, and/or determining
productivity baselines.
The American Health Information Management Association
(AHIMA) has been a pioneer, not only in the HIM
arena but also in medical coding practices. Evidence of this
initiative comes in the form of the Standards of
Ethical Coding published by the organization in an effort to
guide professional coders in the right direction
when it comes to correct coding. The Health Insurance
Portability and Accountability Act (HIPAA) is also a
governing body when it comes to code sets. HIPAA’s Standards
for Code Sets puts forth guidelines as to how
clinical coded data is transmitted from one entity to another
entity. Code set transmissions must be secure,
and information must only be assessed by those who will be
using the data for meaningful purposes. HIPAA
UNIT III STUDY GUIDE
Classification and Code Sets
HTH 1304, Health Information Technology and Systems 2
UNIT x STUDY GUIDE
12. Title
has implemented these regulations to further advance the coding
field as well as to ensure that patient’s
information is safeguarded and protected as it flows from one
institution to the next.
Code sets come in two types: nomenclature and classification.
Nomenclature medical coding is basically a
system of naming health care activities or procedures in order to
stay consistent in electronic communication
(Davis & LaCour, 2017). Examples of nomenclature code sets
would be the Healthcare Common Procedure
Coding System (HCPCS) and Current Procedural Terminology
(CPT). In each of these coding sets, the
selected code is related to a specific definition, and no other
code will be related to that definition. We will
go over a few examples later to show how the coding is
unrelated to other codes in that coding set.
Classification medical coding would be the opposite of
nomenclature as the coding is interrelated and may
build on other codes.
The task of classification coding is to categorize codes, hence
creating a relationship between them. Unlike
nomenclature coding, classification code sets have related
subcategories and sub-terms which create a
sequence that helps coders code more specifically. The
International Classification of Diseases (ICD) may be
one of the more important coding classification systems that we
use in the United States. This classification
system can be used to diagnose diseases as well as document
and report procedures performed by health
care providers. The International Classification of Diseases,
13. Tenth Revision—Clinical Modification (ICD-
10CM) and the International Classification of Diseases, Tenth
Revision, Procedural Coding System (ICD-
10PCS) are the two systems used to perform these tasks (Davis
& LaCour, 2017). Nomenclature and
classification systems have greatly improved the ability of
stakeholders to communicate more effectively with
each other. This “language” allows for professionals in the
health care field to create even more specific code
sets regarding certain areas of medicine. An example of that
would be the International Classification of
Diseases for Oncology (ICD-O) which particularly deals with
neoplasms. Hundreds of these coding systems
have been developed throughout the world, and the attribute of
uniformity is the catalyst.
The Healthcare Common Procedure Coding System (HCPCS) is
a vital nomenclature coding system used by
health care providers and doctors. The task of HCPCS is to code
for services, products, and equipment
provided by health care institutions to patients for billing and
reimbursement purposes. HCPCS is used in
outpatient settings such as emergency rooms, rehabilitation
clinics, and outpatient surgery centers. This
coding system is split into two levels with Level I being the
fourth revision of the Current Procedural
Terminology (CPT-4). CPT-4, or Level I, uses codes to identify
common medical services such as radiology
imaging or basic laboratory tests ordered by a physician. CPT-4
coding would also include services or
procedures rendered on doctor’s office visits or for any drugs
that may be administered. While Level I codes
consist of five numerical characters, Level II codes are
alphanumeric, consisting of a mix of numbers and
letters. Level II, or simply HCPCS codes, are used to report
products, supplies, and services not included in
14. CPT (Davis & LaCour, 2017). For example, ambulance
transportation for a patient would be an example of
coding that does not use CPT-4 but rather would be coded using
Level II. The Centers for Medicare and
Medicaid Services jointly maintains the HCPCS coding system
with the goal of creating a uniform and
standardized code set that will ensure interoperabili ty to all who
use the system. HCPCS/CPT-4 is updated
regularly, usually on a quarterly basis, and communicated
through means such as the Federal Register
(Centers for Medicare & Medicaid Services, n.d.).
The International Classification of Diseases, Tenth Revision—
Clinical Modification (ICD-10-CM) is used
worldwide, and it is tasked with reporting medical diagnoses
and documenting reasons behind patient medical
encounters (Davis & LaCour, 2017). ICD-10-CM consists of a
three-seven-character system that is
alphanumeric, which is helpful if the system needs to be
expanded or coding needs to be added. ICD-10-CM
is a classification code set, so there are many categories and
sub-terms that help physicians and coders be
as specific as they can be while diagnosing illnesses and
diseases. For example, the ICD-10-CM code for a
glaucoma diagnosis is H40. A sub-term that can be used to
create a more specified code would be H40.1211
which is the code for a mild stage of low-tension glaucoma in a
patient’s right eye. The latter code is much
more detailed, which creates better statistical data as well
clearer billing and reimbursement.
15. HTH 1304, Health Information Technology and Systems 3
UNIT x STUDY GUIDE
Title
The International Classification of Diseases, Tenth Revision,
Procedural Coding System (ICD-10-PCS) is
used in inpatient settings to code medical procedures (Davis &
LaCour, 2017). ICD-10-PCS is a seven-
character coding system using both letters and numbers to
classify items. There are 17 sections of ICD-10-
PCS, each one a procedural category. For example, the
radiology section deals with imaging such as X-rays,
while the obstetrics and laboratory sections deal with all things
pregnancy-related and test-related,
respectively.
The Systemized Nomenclature of Medicine—Clinical Terms
(SNOMED-CT) is a European nomenclature
coding system with the goal of assisting in the exchange of
electronic health record (EHR) information (Davis
& LaCour, 2017). This system contains millions of medical
terms which include procedures and diagnostic
information that can be directly translated to other coding
systems such as ICD-10 or HCPCS. The chart
below outlining the diagnostic coding and treatment and/or
procedural coding for kidney stones shows how
useful SNOMED-CT can be in linking medical terminology:
CODE SET CODE MEANING/DEFINITION
SNOMED-CT
16. 95570007 Kidney Stone (Disorder)
6722002 Nephrolithotomy for removal of calculus (procedure)
ICD-10-CM N20 Calculus of kidney
ICD-10-PCS 0TC1 Extirpation / Kidney, Left
HCPCS S0400
Global fee for extracorporeal shock wave lithotripsy treatment
of kidney
stone(s)
CPT-4 50060 Nephrolithotomy; removal of calculus
As you can see, the SNOMED-CT coding for kidney stones can
be directly related to the ICD-10 and HCPCS
coding systems. We can link the ICD-10-CM coding for the
calculus of a kidney, which is N20, directly to the
SNOMED-CT code for the general medical term for kidney
stones, 95570007. Even further, the CPT-4
procedural code for the removal of a kidney stone is 50060,
which can be directly linked to the SNOMED-CT
code for nephrolithotomy which is 6722002. Think about how
helpful this could be for two entities that need to
effectively communicate this type of information but have to
overcome a language barrier to do so.
SNOMEDCT would be critical in this situation as it can make
the connection between the two.
Two of the more specialized code sets in the health care
industry are the National Drug Codes (NDCs) and
Current Dental Terminology (CDT) (Davis & LaCour, 2017).
NDCs are used to identify drugs used for human
consumption in the United States. These codes are updated
17. bimonthly, and they aid in the tracking,
distribution, and dispensing of pharmaceutical drugs. These
codes are helpful if there is ever a recall on a
specific drug. With thousands of drugs in circulation, both
generic and non-generic, this is a very important
code set for safety in the medication industry. Code on Dental
Procedures and Nomenclature or Current
Dental Terminology (CDT) defines terms for dental procedures
and treatments. The American Dental
Association manages these codes, and they are updated
biannually.
HTH 1304, Health Information Technology and Systems 4
UNIT x STUDY GUIDE
Title
The common thread in each of these code sets is the focus of
improving and advancing communication within
the health care field. Each of the code sets discussed above,
whether a nomenclature system or a
classification system, were developed for uniformity and
increased interoperability across systems.
Interoperability is defined as the ability for multiple systems to
transmit electronic health information to each
other without the user being involved in the translation (Office
of the National Coordinator for Health
Information Technology, n.d.). Information is automatically
18. converted so that it can be used in the recipient
system, increasing efficiency and saving time and effort on the
part of the user. There have been many
initiatives led by the Office of the National Coordinator for
Health Information Technology (ONC) that have
improved health information, specifically the adoption of EHRs
and the ability for more users to access them.
As of today, those efforts have led to roughly 41% of hospitals
having access to clinical information from
outside entities, but there is still room for improvement (Office
of the National Coordinator for Health
Information Technology, n.d.). To help continue the
development and advancement of interoperability
between health data systems, the ONC introduced an
interoperability roadmap. This roadmap contains
administrative and technical milestones with the goal of
strategically planning the future of interoperability with
the cooperation of all stakeholders involved.
Coded information provides a tremendous benefit to the health
information field. We can exchange
information faster and more efficiently than ever before, and
health care providers now have more access to
patient information. As technology continues to increase so will
the ability to transmit, manage, and utilize
health data, not only for the betterment of the patient but also
for the betterment of society as a whole.
References
Centers for Medicare & Medicaid Services. (n.d.). HCPCS –
General information.
https://www.cms.gov/Medicare/Coding/MedHCPCSGenInfo/ind
19. ex.html
Davis, N., & LaCour, M. (2017). Foundations of health
information management (4th ed.). Elsevier.
Office of the National Coordinator for Health Information
Technology. (n.d.). Connecting health and care for
the nation: A shared nationwide interoperability roadmap.
HealthIT.
https://www.healthit.gov/sites/default/files/hie-
interoperability/nationwide-interoperability-roadmap-
final-version-1.0.pdf
Suggested Unit Resources
In order to access the following resources, click the links
below.
The National Correct Coding Initiative (NCCI) was developed
by the Centers for Medicaid and Medicare
Services with the task of improving and maintaining accurate
coding policies. The NCCI is updated annually.
The overall purpose of NCCI is to prevent improper coding that
will affect payment and reimbursement.
Centers for Medicare & Medicaid Services. (2018). National
correct coding initiative edits.
https://www.cms.gov/Medicare/Coding/NationalCorrectCodInit
Ed/index.html
The Office of the National Coordinator for Health Information
Technology (ONC) created an interoperability
roadmap that outlines the coordination needed between
20. stakeholders in the exchange of health information.
The Office of the National Coordinator for Health Information
Technology. (n.d.). Connecting health and care
for the nation: A shared nationwide interoperability roadmap.
HealthIT.
https://www.healthit.gov/sites/default/files/hie-
interoperability/nationwide-interoperability-roadmap-
final-version-1.0.pdf
https://www.cms.gov/Medicare/Coding/NationalCorrectCodInit
Ed/index.html
https://www.cms.gov/Medicare/Coding/NationalCorrectCodInit
Ed/index.html
https://www.healthit.gov/sites/default/files/hie-
interoperability/nationwide-interoperability-roadmap-final-
version-1.0.pdf
https://www.healthit.gov/sites/default/files/hie-
interoperability/nationwide-interoperability-roadmap-final-
version-1.0.pdf
HTH 1304, Health Information Technology and Systems 5
UNIT x STUDY GUIDE
Title
Learning Activities (Nongraded)
21. Nongraded Learning Activities are provided to aid students in
their course of study. You do not have to submit
them. If you have questions, contact your instructor for further
guidance and information.
• Chapter 5: Competency Milestone and Critical Thinking
Questions, pp. 182–183, 185
Course Learning Outcomes for Unit IIIRequired Unit
ResourcesUnit LessonReferencesSuggested Unit
ResourcesLearning Activities (Nongraded)
CMBA 603-S Name ___________________________
Test 1 – part 1 (discussion)
Fall 2021
Discussion – Answer the following questions in your own words
– do not copy from the book or notes. Answers should be typed.
This is an open-book, open-notes test. You may not use the
internet or consult with other people, but you may use our
textbook and notes from this class. Both parts of the test are due
at midnight, Monday, September 27. Upload your files to
Canvas.
1. (a) Explain the difference between the net and gross methods
of recording purchases. (b) Explain the difference between the
net and gross methods of recording sales. Include in your
answers how to account for discounts taken or not taken under
each of the methods. Why might the net method be considered
theoretically and/or practically better than the gross method (for
purchases and for sales)?
2. Discuss “inventory shrinkage” and how it impacts the
financial statements.
3. Explain each of the following concepts surrounding accrual
22. accounting and tell how they are related: realization principle,
matching principle, accruals, deferrals. Why did the accounting
profession decide that accrual accounting was superior to cash
accounting for meeting the needs of the primary users of
financial statements?
4. Explain the “cost principle” in relation to accounting for
assets (chapter 2). What are the pros and cons of this approach?
5. Explain the three parts of the cash flows statement and give
two examples of items that would appear in each section.
6. Are debits “good” and credits “bad” in relation to a
company’s financial health? Explain.
7. Explain owners’ equity and its subparts for a private
company and for a corporation. Theoretically, what can you
learn by examining the owners’ equity section of a corporation?
8. Define and differentiate between financial accounting and
managerial accounting. Which one is more regulated and why?
9. Define “Generally Accepted Accounting Principles (GAAP).”
Do all companies have to follow GAAP? Explain.
10. What is “double entry accounting” and how did it help with
the development of business?
11. Are dividends expenses? Why or why not?
12. Define “depreciation” and explain its purpose in financial
accounting. If a company forgot to record depreciation for a
given year, what parts of the financial statements would be
incorrect that year and the following year (if uncorrected)?
13. Discuss the pros and cons of the periodic method and the
perpetual method of accounting for inventory.
14. Hypothetically, assume that a company offers its customers
terms of 3/10, n/30 for paying bills. What annual rate of interest
does this equate to, assuming a 360-day year? Explain your
answer and why knowing the annual rate is important for the
customers.
15. Define and compare special journals and subledgers. How
can they improve the accounting system?
16. In your opinion, which two measures were most informative
in the project using the Home Depot annual report? (You may
23. use the ones you submitted or ones that others submitted).
Explain why. Also, discuss facts you learned about Home Depot
that helped you understand the company’s current or past
operating environment.