Generally Accepted Accounting Principles Essay

In recent years healthc be systems contain become more like worry entities than health care providers. technology is continually evolving so is healthcare and its monetary approach. Generally recognized explanation Principles (GAAP), is a guide used by healthcare providers to account for their financial activities. GAAP is a guideline or a group of objectives and concepts that take a leak evolved over 500 years from the basic concepts of Luca Pacioli qualify forth in the 1400s (Omar, 2010). It comprises a set of principles that subscribe been developed by the accountancy profession. jibe to Saunders (1993), Financial accounting system Standards Board (FASB) established the rules and guidelines which require CPAs to indicate whether an audited set of financial statements is in compliance with GAAP (p. 104). They are cardinal principles and individually one will be discussed in relation to healthcare. These are overriding to the effectiveness of business bill. histor y principles take on the following be entity, gold measurement, wave-particle duality, cost evaluation, and unchangeable monetary whole.Accounting EntityAn accounting entity is the business or corporation that performs clear economical activities, separate from whatever personal economic endeavors (Cleverly, Cleverly, & Song 2011). In health care accounting entities can be surgical centers, hospitals, clinics, home health agencies, nursing homes, or some former(a) entities that are part of a larger health care network. An accounting entity requires financial records that define organizations financial activities that are clear and concise. Cleverly, Cleverly & Song (2011) states that if an entity is not properly defined, evaluation of its financial information may be unsatisfying at best and misleading at worst. The entity is expected to maintain its accounting records in accordance to GAAP.Money MeasurementMeasurement is the process of find the monetary measurements at wh ich the elements of the financial statements are to be recognized and carried in the balance sheet 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 confine 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 cash in ones chips liabilities in money measured pry (Cleverly, Cleverly & Song 2011). An entity shall not recognize an element of financial statement unless a reliable time measure can be assigned to it. Duality. This is a fundamental convention of accounting that necessitates the recognition of all aspects of an accounting transac tion.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 +Net assets. In any given situation the value of assets will always equal the value of claims. Cost valuation. When looking at an organization one needs to cheat about the assets and their value. When assets are recognized the basis for valuation needs to be determined. The two bases are historical and fair value (Saunders, 1993). The amount salaried for the asset is the basis for valuation which is referred to historic and fair value is the amount an asset could be exchanged between knowledgeable willing parties. The warms accounting statements reflect the companys financial location and this is presented in the balance sheet. GAAPs in the United States require the valuation of opin ionated 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 operate as business entities, and their accounting operation is the same as any other entity. motionless monetary building block. 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 fall down in terms of real goods of what the dollar can purchase. Monetary unit assumption makes accounting process manageable however it can be problematic. If in any case the value of money changes rapidly overdue 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 b e verbalized in terms of currencies. Nurse Managers must be able to elapse with financial managers of the organization as they help steer the overall advocate 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 understand of accounting entity, money measurement, duality, cost valuation and stable monetary unit will help any health organization to manage their funds 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. Saund ers, 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 depict Between Representational Measurement Theory And The Classical Theory of Measurement. Journal of International Business and Economics Research, 10(5), 59-68.