Premium Essay

Accounting Principles in Healthcare

In: Business and Management

Submitted By akinsum
Words 547
Pages 3
Accounting Principles Related to Nursing
Olasumbo Dada
University of Phoenix

Abstract
The continuing rise in technological advancement in the health care industry has led to a rising cost in the industry. Hospitals and other healthcare sectors face a major challenge in managing the massive change in respect to cost and still being able to provide excellent care for their patients considering the expansion that the industry is continuously facing. As a result, the financial accounting aspect of the healthcare industry needs more attention than ever. The advancement in the financial aspect of healthcare requires more people to assume administrative duties. Cleverly, Song, & Cleverly (2011). For healthcare organizations to function properly in the increasing change in cost, revenue, and reimbursement by third parties, certain principles are necessary to be in place. According to Voelm, K. (2013), some generally accepted financial principles in healthcare are: Accounting Entity, money measurement, duality, cost valuation, stable monetary unit.

Accounting principles related to Nursing Accounting Entity: Accounting entity is the part of a business that specializes in economic activities. Once an entity is established, accountants are able to determine the cash flows and transactions that will impact the entity's financial statements. Accountants in organizations focus on accounting entities and report transactions that are related to that entity. Accounting entities control the economic resources, but are separated or different from the personal dealings of the owners of the business (businessdictionary.com). In healthcare, accounting entity takes care of the budgetary systems, financial statements, cost analyses payroll, Medicare bills and cost reports, and so on (Cleverly, Song, & Cleverly, 2011).
Money measurement
Money measurement means that only

Similar Documents

Free Essay

Accounting

...Running Head: Accounting Principles and Ethics Article Accounting Principles and Ethics Articles Myrthe SaintLouis HCS/457 November 30, 2009 Victoria Odom Abstract A healthcare organization is one of the most successful business inside of a healthcare organization theres so many different profession within, from healthcare providers such as physician, nurses ,Medical assistants and so many more. .A healthcare organization also provide care, , consistency, and support.In addition to care being providing in health care Financial management is another important assets in healthcare organization. With todays econmy crisis healthcare organization face many financial issues for example, Decreasing revenues, increasing costs and terminating healthcare workers .Being a Mananager,Administrator in a healthcare organization is not a easy job because they have to ready lead in today’s climate and also position their organizations for later financial issues and potential political changes. . In order to have an effective financial management, organization, many health care organizations use the Generally Accepted Accounting Principles, corporate compliance, and the value of ethics. Accounting Principles and Ethics Articles A healthcare organization is one of the most successful business inside of a healthcare organization theres so many different profession within, from healthcare providers such as physician, nurses ,Medical assistants and...

Words: 464 - Pages: 2

Premium Essay

Gaap in Healthcare

...Generally Accepted Accounting Principles in Healthcare Generally Accepted Accounting Principles or GAAP was developed from different accounting entities, one of which was the Financial Accounting Standards Board or FASB. GAAP is a group of standards for accounting with common industry language developed over many years and used by businesses to organize financial information. The main purpose for GAAP is to make a standard way for anyone to pick up a financial statement and be able to compare financials using the same set of rules. GAAP is an accounting method used in health care facilities. These are specific policies that are used when the health care institution must make important financial decisions. To understand financial statements, the importance and relevance of GAAP must be understood. These standards guide accountants in the measuring and reporting of financial events of healthcare entities such as hospitals, clinics, not-for-profit groups, and other healthcare related businesses. The information used in these financial statements must be relevant, reliable, and comparable. Some of the concepts or principles used in the preparation of financial statements by way of GAAP are discussed below. Accrual Principle The accrual principle simply means that accounting transactions should be recorded in the period that they occur rather than when the cash flows related to them occur. In the healthcare field, all revenue earned for in-house patients should be recorded...

Words: 989 - Pages: 4

Premium Essay

Generally Accepted Accounting Principles

...Generally Accepted Accounting Principles in Healthcare HCS/571 May 30, 2011 Generally Acceptable Accounting Principles in Healthcare Generally Accepted Accounting Principles (GAAP) are used to regulate the process of financial accounting and the preparation of financial statements for organizations. GAAP are essentially a set of rules, established by the Financial Accounting Standards Board, that provide a framework for formalized accounting systems that keep track of the financial health and well-being of organizations such as private and publicly traded firms, non-profit organizations and not-for-profits such as healthcare organizations (Finkler, Kovner, & Jones, 2007). GAAP are comprised of a group of requirements and rules, used to prepare the four primary statements used in financial accounting: balance sheets, statements of operation, statements of cash flow, and statements of changes in net assets (Cleverly, Song, & Cleverly, 2011). These statements help organizations to report on their overall financial health and ability to exist as a viable financial entity. There are a number of basic financial principles that make up GAAP. These include: • Entity concept • Going-concern concept • Matching principle and cash vs. accrual accounting • Cost principle • Objective evidence • Materiality • Consistency • Full disclosure Entity Concept According to Cleverly, Song, & Cleverly...

Words: 1160 - Pages: 5

Premium Essay

Accounting Principle

...Accounting Principles Relating to Healthcare Christine Watts HCS/571 May 26, 2014 David Catoe Accounting Principles Accounting is a numbers related profession. Staying solvent financially are what business leaders and owners strive for to stay competitive and to keep their doors open. Healthcare institutions are in the business to care for people, but at the same time they must make money in order to achieve this goal. Whether they are for profit or not for profit, accountants and financial managers make decisions every day to keep budgets in line, keep people working, and patients happy. No matter what position one holds in a company, it is important to have a basic understanding of general accounting principles and how they apply to healthcare. The first principle is the accounting entity. The entity is an organization in which the financial information is recorded and reported (Cleverly, Song, & Cleverly, 2011). This must be clearly defined so that the financial reports give a clear picture of the finances for that specific organization. The accounting entity is different from the legal entity so if the organization is a subsidiary or a sole proprietorship, the financial picture must be for the defined organization so that the information is useful and not misleading. Health care organizations that have ownership of many different entities, must keep them separate so that each organization has a clear defined picture of its own financial information...

Words: 1021 - Pages: 5

Free Essay

Gaap Paper

...Generally Accepted Accounting Principles in Healthcare April Dierickx HSC/571 June 10, 2013 Tamica Lewis Generally Accepted Accounting Principles in Healthcare Generally Accepted Accounting Principles (GAAP) are the accounting standards used in the United States that provide an outlet for organization to record and report their financial information in a standardized manner (Richards, n.d.). This has proven to be of particular importance in the healthcare arena where many areas of finances can be ambiguous or gray. Additionally, the principles guide the reporting systems to prove or disprove the financial viability of the organization. This again is important in the healthcare industry related to achieving the goal of providing quality care to patients (Cleverly, Song, & Cleverly, 2011). GAAP focuses on five different principles of accounting. Accounting entity, money measurement, duality, cost valuation, and stable monetary unit are the five principles discussed in the following paragraphs. Principle definition and the relationship they have to the healthcare industry will be identified and correlated to healthcare practices. Accounting Entity Cleverly, Song, & Cleverly (2011), define an accounting entity as the organization for which financial statements are being formed. They discuss the difference between entities such as sole proprietorship, incorporations, and affiliations with government agencies and universities. The clear definition does not include...

Words: 818 - Pages: 4

Premium Essay

Reporting Practices and Ethics Paper

...McLaughlin HCS/405 December 8, 2014 Jack Heinen Reporting Practices and Ethics Paper This paper will seek the financial reporting practices, ethical standards, accounting principles, corporate compliance, ethics, or fraud and abuse in the articles that was chosen to be reviewed. Financial reporting in a medical office or a healthcare organization relies on financial data to be close to real time as they can get it. The financial reporting has advantages such as analysis, visualization, and assistance in decision-making ("Financial Reporting", 2009). Chief financial officers use the financial reporting to help identify the profits and the cost of the healthcare organization. Financial reporting will lead the financial personnel to quantified, data-driven choices which will benefit them with accurate planning, forecasting, and budgeting ("Financial Reporting", 2009). Financial reporting can aid in to reduce a cost, profitability, predict and respond to changes in the market ("Financial Reporting", 2009). Ethical standards in a healthcare organization should be guided by integrity, serves as a role model, and support a culture that provides high-quality, cost-effectiveness health care which helps the ethical behavior and practices of individuals throughout the organization ("Creating An Ethical Culture Within The Healthcare Organization", 1992-2011). It does not matter if the person is a gift shop manager or a CEO of a four star organization ethics should be the central mission and...

Words: 1208 - Pages: 5

Premium Essay

Reporting Practices and Ethics Paper

...and Ethics Paper Generally accepted accounting principles (GAAP) represent the general rules, standards, and practices that are used in accounting. GAAP are required for businesses when reporting financial records. When preparing financial statements, a company’s accountant is mandated to use these principles before they issue these statements to investors and other entities outside of the business. The objective for these standards are to assist in ensuring that ethical accounting practices occur wherein investors and creditors have the confidence that companies are truthfully reporting their financial solvency. In summary, the GAAP are responsible for ensuring that companies ethically record measurements at regular business intervals, prepare and summarize economic information in accordance to ethical standards, accurately measure economic activity, and truthfully disclose information about economic activity. Corporate compliance, ethics, or fraud and abuse Medical fraud and abuse in the healthcare industry is a rampant occurrence that significantly impacts not only healthcare in America but also the entire economy. Fraud and abuse within the healthcare industry can account for approximately 15 percent of annual expenditures. This represents up to $170 billion annually being lost because of fraud and abuse in the healthcare industry. Although the federal government has consistently passed legislation to fight against healthcare fraud, and committed millions of dollars...

Words: 737 - Pages: 3

Free Essay

Generally Accepted Accounting Principles

...Generally Accepted Accounting Principles Introduction In the past, the financial statements of health care organizations’ were fairly easy to compare. Historically, members of the healthcare community had applied similar sets of accounting rules without regard to their business structure. This meant that whether an organization was a for-profit, nonprofit, or a government owned, every healthcare entity was considered to be in the same industry and the accounting procedures they were forced to follow were similar, thus increasing the level of comparability between organizations. However, today’s standard setting environment requires these similar organizations to apply different sets of accounting standards based of their business model. Resulting in similar transactions being accounted for differently and reducing the level of comparability between financial statements. This has led to the need and implementations of Generally Accepted Accounting Principles. Generally Accepted Accounting Principles, or GAAP, are a framework of accounting standards, rules and procedures defined by the professional accounting industry, which have been adopted by nearly all publicly traded companies in the United States, and allow for the recording and reporting of financial information in a uniform manner (Investing Answers, 2015). The benefit to companies using GAAP is that it makes it easier to compare the financial statements of different companies. GAAP aids in health care to establish...

Words: 998 - Pages: 4

Free Essay

Gaap

...Generally Accepted Accounting Principles in Healthcare Generally Accepted Accounting Principles (GAAP) are the accounting standards used in the United States that provide an outlet for organization to record and report their financial information in a standardized manner (Richards, n.d.). This has proven to be of particular importance in the healthcare arena where many areas of finances can be ambiguous or gray. Additionally, the principles guide the reporting systems to prove or disprove the financial viability of the organization. This again is important in the healthcare industry related to achieving the goal of providing quality care to patients (Cleverly, Song, & Cleverly, 2011). GAAP focuses on five different principles of accounting. Accounting entity, money measurement, duality, cost valuation, and stable monetary unit are the five principles discussed in the following paragraphs. Principle definition and the relationship they have to the healthcare industry will be identified and correlated to healthcare practices. Accounting Entity Cleverly, Song, & Cleverly (2011), define an accounting entity as the organization for which financial statements are being formed. They discuss the difference between entities such as sole proprietorship, incorporations, and affiliations with government agencies and universities. The clear definition does not include employees or other persons or organizations with vested interest in the organization but solely the organization’s financial...

Words: 267 - Pages: 2

Premium Essay

Reporting Practices and Ethics Paper

...being a successful healthcare financial manager are “planning, organizing and directing, controlling, and decision making.” (Baker & Baker, 2011) “Getting money in” represents the inflow (revenues), whereas “getting money out” (expenses) represents the outflow.” (Baker & Baker, 2011) Good financial managers are able to adjust inflow and outflow that will make the organization successful in achieving its financial goals and objectives. Healthcare planning gives a step-by-step breakdown of what objectives the organization is working towards. Controlling allows financial managers to ensure that each department within the organization is accomplishing the objectives that have been set forth company-wide. Organizing and directing allows financial managers to make effective decisions on how to carry out plans that have already been established within the organization. Financial managers must direct on a daily basis to make sure the organization runs smoothly and provide supervision and guidance where needed. Decision making gives financial managers room to make choices on various alternatives presented to them. All decisions are based on information and analysis provided, and this information provides the tools for financial managers to make informed decisions concerning the organizations strategic financial planning. Generally Accepted Accounting Principles (GAAP), provide guidelines that help organization’s record business transactions. These principles provide creditability...

Words: 765 - Pages: 4

Premium Essay

Accounting Principles

...Generally Accepted Accounting Principles and Healthcare University of Phoenix Online December 23, 2013 Generally Accepted Accounting Principles and Healthcare Accounting measures allow the public, those granting credit and investors, the opportunity to review a business’s financial performance through the review of financial statements. The financial market is grounded on the truthfulness of financial statements that allow investors to estimate the value of securities. The usage of generally accepted accounting principles (GAAP) is part of an organized and regulated method for financially educated professionals to create financial statements. GAAP outlines in detail the components necessary for large and small businesses to disclose their financial performance as accurate as possible to avoid bias (Federal Accounting Standards Advisory Board, 2013). GAAP addresses the wide range of accounting practices down to the small and specialized business. Accounting Principles “Generally accepted accounting principles (GAAP) are rules established by the Federal Accounting Standards Advisory Board (FASAB)” (Finkler, Kovner, & Jones, 2007, p.104). The development of accounting principles became emergently necessary because of the trend of major financial disasters. The stock market crash and demise of Enron were a result of faulty and deceptive accounting practices which failed to disclose the true state of the organizations. Events like these precipitated the need for GAAP...

Words: 1062 - Pages: 5

Premium Essay

Pratice and Ethics

...audits of the amounts, control, and potential uncertainties of cash flows. Keeping the financial data current is important because majority of the time the data contains information about the organization’s equity and economic resources. Developing and analyzing ethical standards carefully allows organizations to stay in compliance with those standards formed for the health care community. Poor ethics and financial planning sometimes effects consumers. According to Nelson (2011), “Basic ethics principles that make up our common morality, including respect for patients, acting in patients’ best interest, avoid bringing harm to patients and treating patients in a fair and equitable manner, serve as the foundation for healthcare values.” This paper will contain a summary of the four elements associated with financial management, generally accepted accounting principles, and general financial ethical standards. The reader will explore Examples from two articles “Ethical Decision making for healthcare Executives” and “Ethics: A foundation for quality” that reflect ethical standards of conduct, financial reporting practices, and the significance of each example. Four elements of financial Management The four elements of financial management are planning, controlling, organizing/directing, and decision making. Planning is the methodical manner in which decisions are made according to the goals of an organization both short and long term. Management must supervise and monitor each...

Words: 1126 - Pages: 5

Premium Essay

Papers

...Reporting Practices and Ethics Megan HCS/405 30 June, 2014 Reporting Practices and Ethics The accounting staff is a very large part of the healthcare industry. Accounting staff code and bill products and different services that are offered at that location and maintaining an ethical culture is imperative. There are accounting principles and standards and procedures that are part of the General Accepted Accounting Principles (GAAP). The GAAP principles have four key elements: Planning, Controlling, Organizing and Directing and Decision Making. Ethical Components and GAAP Accounting is the backbone of any medical organization because of it enormous impact on running as a cost effective organization. Every organization runs on its own set of principles and goals, but most are certainly guided by different federal, state, and government laws. There are accounting principles and standards and procedures that are part of the General Accepted Accounting Principles (GAAP). The GAAP principles have four key elements: Planning, Controlling, Organizing and Directing and Decision Making. The GAAP principle of Planning includes ways of setting goals and guidelines for the future of the organization. The principle of Controlling involves ensuring that planned goals are on track with previous goals and also that there is room to fix any issues that may arise. Organization and directing is to make sure that the organizations full potential is being provided...

Words: 806 - Pages: 4

Premium Essay

Reporting Practices and Ethics Paper

...business in order to be successful. It is the same for the healthcare organizations. The healthcare finance manager should be very knowledgeable of the general financial ethical standards so their business can keep a positive reputation. In the United States there are generally accepted accounting principles (GAAP) that businesses must abide by. This determines how accountants conduct and format their reports in house and to others. Since these reports will be seen by others that are outside of the business, the FASB made it easy for everyone to understand it. If every company had their own way of methods for their accounting reports comparing financial statements would not be accurate and it will be easier to hide information. One of the key ethical standards for a business is that their accountant must have competence. “To be competent, accountants and professionals must not only have secured education and practice that prepares them for their position, they must also continue that education by learning new information that can affect their practices”. (Morley, 2015. Pg. 1, Para. 3). Objectivity is another principle that an accountant must have. AN accountant may not work for a company that he or she has a vested interest in. for example, an accountant should not work for a relative because it could look as if he or she is not being objective or cast doubt on their intentions. Confidentiality is a big principle to abide by. An accountant has knowledge of their business...

Words: 821 - Pages: 4

Premium Essay

Hcs 405

...HCS 405 2 Sep 2014 Working as a financial manager comes with a lot of responsibility; and a lot of standards of practice. Just like physicians and nurses, financial managers of health care organization have a set of rules and ethical guidelines they must follow in their practices. In this paper, I will what the four elements of financial management are. There will also be a summary of generally accepted accounting principles (GAAP) and financial ethical standards. Business’s mist follow these standards in order to comply with federal agencies such as the Financial Accounting Standard Board. I will also provide examples from articles that explain how corporations comply with these standards and deal with fraud or abuse. The four elements of financial management. The key to good financial management is to be well organized and have good finical discipline. Health care is a business and having a good concept of financial management will help those businesses run smoothly. “The healthcare industry is a service industry, its essential business is the delivery of healthcare services.”(Refaat, 2014) Having a good understanding of the elements of financial management can help to explain the financial management of that service industry. The first element is planning, planning helps identify the steps that must be taken in order to accomplish the organizations objectives. The second is controlling, this is in place to help ensure that the financial manager makes sure that each...

Words: 1023 - Pages: 5