Generally Accepted Accounting Principles Essay

In recent years healthc be systems have become to a greater extent like vexation entities than health care providers. Technology is continually evolving so is healthcare and its monetary approach. by and large Accepted Accounting Principles (generally accepted accounting principles), is a guide used by healthcare providers to account for their pecuniary activities. generally accepted accounting principles is a guideline or a group of objectives and concepts that have evolved over 500 years from the sanctioned concepts of Luca Pacioli set forth in the 1400s (Omar, 2010). It comprises a set of principles that have been developed by the accounting profession. tally to Saunders (1993), Financial Accounting Standards Board (FASB) established the rules and guidelines which require CPAs to indicate whether an audited set of financial statements is in deference with GAAP (p. 104). They are five principles and each one will be discussed in relation to healthcare. These are paramount to the effectiveness of business accounting. Accounting principles include the following accounting entity, money measurement, duality, cost evaluation, and lasting monetary unit.Accounting EntityAn accounting entity is the business or corporation that performs clear economic activities, separate from all personal economic endeavors (Cleverly, Cleverly, & numbers 2011). In health care accounting entities rat be running(a) centers, hospitals, clinics, home health agencies, nursing homes, or some other entities that are part of a larger health care network. An accounting entity requires financial participates that define organizations financial activities that are clear and concise. Cleverly, Cleverly & Song (2011) states that if an entity is non properly defined, evaluation of its financial information may be useless at best and tawdry at worst. The entity is expected to maintain its accounting records in accordance to GAAP.Money MeasurementMeasurement is the affect of dete rmining the monetary amounts at which the elements of the financial statements are to be recognized and carried in the balance woodworking plane and income statement as a contribution to the accounting theory of extensive measurement (Scrimnger, & Musvoto,2011). Resources and liabilities have to be considered and calculated to determine accurate money measurement in an organization. These resources are referred to as assets, which include money, buildings and equipment. In health care these assets include, buildings, cash-flow, and equipment. Liabilities will be salaries to the employees and loans owed from banks and any other companies they are in business with. In most normal situations assets exceed liabilities in money measured value (Cleverly, Cleverly & Song 2011). An entity shall not recognize an element of financial statement unless a reliable value can be depute to it. Duality. This is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transaction.According to Cleverly, Cleverly & Song (2011), The value of assets must always equal the combined value of liabilities and residual interest, which we have called net assets. He goes on to explain the basic accounting equation, the duality principle, may be stated as follows Assets=Liabilities + earnings assets. In any given situation the value of assets will always equal the value of claims. salute valuation. When looking at an organization one needs to know about the assets and their value. When assets are recognized the floor for valuation needs to be determined. The two bases are historic and fair value (Saunders, 1993). The amount nonrecreational for the asset is the basis for valuation which is referred to historic and fair value is the amount an asset could be transfer between knowledgeable willing parties. The firms accounting statements reflect the companys financial status and this is presented in the balance sheet. GAAPs in the United Sta tes require the valuation of fixed assets at historical cost, adjusted for any estimated gain and loss in value from improvements and the aging, respectively, of these assets.As mentioned previously hospitals now execute as business entities, and their accounting motion is the same as any other entity. Stable monetary unit. In any organization, the monetary unit principle assumes that the value of the unit currency in which you record transactions remains stable over time. This concept allows accountants to disregard the effect of in inflation, a pass in terms of real goods of what the dollar can purchase. Monetary unit assumption makes accounting serve manageable however it can be problematic. If in any case the value of money changes quick due to market conditions or policy changes, a businesss financial statements may be less useful for comparison with prior records (Omar, 2010).Accounting focuses on the financial aspects of the business and that too for matters which can be expressed in terms of currencies. Nurse Managers must be able to communicate with financial managers of the organization as they facilitate steer the overall direction of the organization (Saunders, 1993). The health care operation relies on revenues from patients billing and in turn help sustain the business on them and any other income. Health care systems are able to run business successfully by using GAAP guidelines. We have seen in this discussion that the five principles of accounting are essential in daily business operation. The understanding of accounting entity, money measurement, duality, cost valuation and stable monetary unit will help any health organization to manage their finances well.ReferencesCleverly, W. O., Cleverly, J. O., & Song, P. H. (2011) Essentials of health care finance (7th ed.). Sudbury, MA Jones and Bartlett. Omar, O. (2010). why Generally Accepted Accounting Principles Should Inform U.C.C. Article 9 Decisions. Texas Journal Of Law Review, 89(1), 207 -226. Saunders, G. (1993) Accounting principles (5th ed.). Hoboken, NJ John Wiley & Sons. Scrimnger, C. C., & Musvoto, S.W. (2011). The Accounting Concept of Measurement And The Thin Line Between Representational Measurement possibleness And The Classical Theory of Measurement. Journal of International Business and Economics Research, 10(5), 59-68.