Accounting Principles and Health Care
Accounting Principles and Health Care
Samantha Mrazek
HCS 571
March 19, 2012
John Hodnette
Accounting Principles and Health Care There are no formal accounting principles that apply to health care. However, there are five generally accepted guiding principles used in the management of the financial aspects of health care management (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles are important in understanding financial information and managerial accounting and how the principles relate to health care (Cleverly et. al.). The five principles include, accounting entity, money measurement, duality, cost valuation, and stable monetary unit. Each principle and how it relates to health care is discussed in the following (Cleverly et.al.). Accounting Entity An accounting entity is the business or corporation that performs clear economic activities, separate from any personal economic endeavors (Accounting Tools, 2010). An accounting entity requires financial records that define financial activities (Cleverly et. al.). In health care, accounting entities can be hospitals, clinics, or other entities that are part of a larger corporation. Accounting is geared to measure and report the financial activities of the entities under consideration. Money Measurement Money Measurement is very simply, a way to keep count and records of the incoming and outgoing revenue of the accounting entity. This is not an easy task and involves consideration of various issues (Cleverly et. al.). Resources and liabilities have to be considered and calculated to determine accurate money measurement. Resources are also referred to as assets. Scarce resources are things, supplies, money, and other things or resources that are needed by the company in order to generate money. These resources are limited and necessary to the entities operation (Cleverly et. al.). This may include nursing staff for heath care
Samantha Mrazek
HCS 571
March 19, 2012
John Hodnette
Accounting Principles and Health Care There are no formal accounting principles that apply to health care. However, there are five generally accepted guiding principles used in the management of the financial aspects of health care management (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles are important in understanding financial information and managerial accounting and how the principles relate to health care (Cleverly et. al.). The five principles include, accounting entity, money measurement, duality, cost valuation, and stable monetary unit. Each principle and how it relates to health care is discussed in the following (Cleverly et.al.). Accounting Entity An accounting entity is the business or corporation that performs clear economic activities, separate from any personal economic endeavors (Accounting Tools, 2010). An accounting entity requires financial records that define financial activities (Cleverly et. al.). In health care, accounting entities can be hospitals, clinics, or other entities that are part of a larger corporation. Accounting is geared to measure and report the financial activities of the entities under consideration. Money Measurement Money Measurement is very simply, a way to keep count and records of the incoming and outgoing revenue of the accounting entity. This is not an easy task and involves consideration of various issues (Cleverly et. al.). Resources and liabilities have to be considered and calculated to determine accurate money measurement. Resources are also referred to as assets. Scarce resources are things, supplies, money, and other things or resources that are needed by the company in order to generate money. These resources are limited and necessary to the entities operation (Cleverly et. al.). This may include nursing staff for heath care
References: Accounting Tools (2010). Accounting entity. Retrieved from http://www.accountingtools.com/definition-accounting-entity Cleverly, W. O., Song, P. H., & Cleverly, J. O. (2011). Essentials of health care finance (7th ed.). Sudbury, MA: Jones and Bartlett Learning. Hutton, G. (2005, June). Cost valuation in resource-poor settings. Retrieved from http://heapol.oxfordjournals.org/content/20/4/252.full