Federal Nursing Home Administrator Practice Exam

What does the term expenses refer to in a facility's financial statement?

1. Cost of goods sold

2. Earnings

3. Cost of personnel and supplies used in provision of service

4. Net worth

The correct answer is: Cost of personnel and supplies used in provision of service

In financial statements for a facility, the term "expenses" specifically refers to the costs incurred for the provision of services, which includes the cost of personnel and supplies. This encompasses all operational costs necessary to deliver care to residents, such as salaries, wages, benefits for staff, and the purchase of medical and everyday supplies. Understanding this definition is crucial for effective financial management and budgeting within healthcare facilities. While costs of goods sold relate to expenses, they typically apply to retail or product-oriented businesses rather than a healthcare context. Earnings generally refer to revenue and profit, which do not fall under the category of expenses. Net worth represents the assets minus liabilities and is a measure of the financial health of an organization, not an expense. Thus, recognizing that expenses are primarily tied to the costs of operations provides clarity on how finances are managed in a nursing home setting.