General Accepted Principles
Generally Accepted Accounting Principles
HCS/571
Generally accepted accounting principles, better known as (GAAP) discloses statements and reports financial information dealing with businesses and organizations. They are rules made by the Financial Accounting Standards Board (FASB) in which are commonly used in the health industry to maintain the decisions of the organization. GAAP gives detailed information to investors about the budget of the organization and their debt. GAAP includes the most common principles used in the health care setting. They are; the entity concept, going-concern concept, matching principle and cash vs. accrual accounting, cost principle, objective evidence, materiality, consistency, and full disclosure (Finkler, Kovner, & Jones, 2007).
Entity concept Describing the person or organization that has the primary focus would be the entity. For example a church or school would be considered an entity. The main purpose for this concept is to provide financial report and statements of supplies used and purchased. It also gives reports of balances that have been paid off or need to be paid (Finkler, Kovner, & Jones, 2007). Hospitals are considered an entity and if the church and school were all joined with the hospital they would be an entity. However, when providing financial statements and reports these would be used separately (Finkler, Kovner, & Jones, 2007). It gives a detailed look at the expenses spent in each area.
Going-concern concept The going concern concept is giving assumption to the business that it will continue. Financial statements are prepared as if the business will continue to grow without closing their doors. If resources are valuable to an ongoing organization, it will have less value if the business goes out of business (Finkler, Kovner, & Jones, 2007). In a health care setting, if a hospital closes there are no resources or value to keep it open.
Matching principle and cash vs. accrual
HCS/571
Generally accepted accounting principles, better known as (GAAP) discloses statements and reports financial information dealing with businesses and organizations. They are rules made by the Financial Accounting Standards Board (FASB) in which are commonly used in the health industry to maintain the decisions of the organization. GAAP gives detailed information to investors about the budget of the organization and their debt. GAAP includes the most common principles used in the health care setting. They are; the entity concept, going-concern concept, matching principle and cash vs. accrual accounting, cost principle, objective evidence, materiality, consistency, and full disclosure (Finkler, Kovner, & Jones, 2007).
Entity concept Describing the person or organization that has the primary focus would be the entity. For example a church or school would be considered an entity. The main purpose for this concept is to provide financial report and statements of supplies used and purchased. It also gives reports of balances that have been paid off or need to be paid (Finkler, Kovner, & Jones, 2007). Hospitals are considered an entity and if the church and school were all joined with the hospital they would be an entity. However, when providing financial statements and reports these would be used separately (Finkler, Kovner, & Jones, 2007). It gives a detailed look at the expenses spent in each area.
Going-concern concept The going concern concept is giving assumption to the business that it will continue. Financial statements are prepared as if the business will continue to grow without closing their doors. If resources are valuable to an ongoing organization, it will have less value if the business goes out of business (Finkler, Kovner, & Jones, 2007). In a health care setting, if a hospital closes there are no resources or value to keep it open.
Matching principle and cash vs. accrual
References: Finkler, S. A., Kovner, C. T., and Jones, C. B., (2007). Financial management for nurse managers and executives. (3rd ed.) St. Louis, MO: Saunders Elsevier