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General Accounting Essay

1538 words - 7 pages

Generally Accepted Accounting Principles
Deborah Gandy
June 3, 2013
Tamica Lewis

Generally Accepted Accounting Principles
To meet health care changes resulting from decreased reimbursement an aging population, and technology the nursing professions responsibilities morphed from the bedside to the board room. In the last two decades a substantial increase in nurses in senior level positions in hospitals or other facilities reflects the need for nurses to obtain advanced degrees to meet the demands of heath care as a business.
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” (p. 5).
Overseen by the Financial Accounting Standards Board (FASB), GAAP provides individuals or organizations principles and rules to follow in the entry of financial transactions, and the development of financial statements. In health care a majority of organizations require a certified public accountant (CPA) to audit financial statements therefore requiring the adoption of GAAP, and rules (“FASB-accounting standards and other pronouncements,” n.d.).
Generally accepted accounting principles described below include “(1) Entity concept, (2) Going-concern concept, (3) Matching principle and cash versus accrual accounting, (4) Cost principle, (5) Objective evidence, (6) Materiality, (7) Consistency and (8) Full disclosure” (Finkler, Kovner & Jones, 2007, p. 104). These principles together provide the nurse foundational knowledge necessary as the basis to understanding accounting.

Entity Concept

The entity concept in accounting can pertain to the individual or organization. From an individual entity concept people frequently seek out an accountant to assist in managing personal financial transactions. Apply this same definition to an organization. Organizations could also function as a singular entity or as many organizations today contain many other entities such as a medical school, nursing home or acute-care facility. Though GAAP requires the organization as an entity to enter transactions the same principles, and rules apply for each separate entity that comprises the entire organization. By defining an entity the ability to track all transactions associated with the entity becomes straight-forward facilitating analysis, and promoting accountability ( Finkler, Kovner & Jones, 2007).
Going-concern Concept

The going-concern concept assumes that a business intends to continue operating. Because an entity contains assets, the value of those assets is dependent on the assumption that the business continues. Entities that intend to go out of business in the near future must make their intention known to provide an account of assets (Finkler, Kovner & Jones, 2007). In health care a facility that intends to change how it operates or intends to go out of business must comply with the required GAAP to provide audited financial statements by a CPA as well as meet Department of Health or department of Insurance requirements.

Matching Principle and Cash versus Accrual Accounting

According to (Finkler, Kovner & Jones, 2007) ” The simplest way to record revenues and expenses is on a cash basis.”(p. 105). To facilitate the process of assessing an organization’s financial health the recording of expenses and revenues must occur within the same year, the matching principle. Even when payment does not occur within the same time...

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