...Financial Accounting Systems Tracy Pankey HCS/571 August 20, 2012 Professor Debra Vaughn Financial Accounting Systems The profession of nursing has enveloped itself into the development of gaining the skill and knowledge of health care financial systems within the health care arena. With government regulations and measures needed to improve the health care reform, it is expected that all members of the health care organization become actively involved in terms of the aspect of financial accounting. Accounting information is useful in determining organizational performances both in the past and is a great predictor in terms of future financial viability. The purpose of this paper is to explain generally accepted accounting principles (GAAP), describe each principle, its intent, and how it relates to health care. In an effort for health care organizations to maintain financial soundness, the preparation of financial statements is a key factor in terms of identifying and correcting accounting errors. A popular accounting method used among many organizations and firms is the generally accepted accounting principles (GAAP). For example, Finkler, Kovner, & Jones (2007) stated “GAAP are rules established by the Financial Accounting Standards Board (FASB). Certified public accountants (CPA) are experienced in accounting and the performance of audits. CPA’s examine financial records, seek to identify errors found in the financial documents, evaluate the organization’s...
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...Generally Accepted Accounting Principles Debra Hilling HCS 571 January 24, 2011 Generally Accepted Accounting Principles Accounting departments are no longer the sole responsible parties for the financial management of a health care organization. Nurse managers, pharmacy directors, and department direction are often responsible for financial management. Accounting Concepts Financial management is the management of an organization’s finances. The goal of financial management is to maximize the wealth or profit of an organization and to achieve its other goals. Financial management includes accounting and finance. Accounting is the management of an organization’s financial information. Accounting includes financial and managerial accounting. Financial accounting is the compilation of retrospective information about an organization’s operation and the results of the operation. Managerial accounting provides insight and information that will improve decisions made by management. Finance includes an analysis of an organization’s acquisition and disposition of resources. Financial management has two goals: profitability and viability. Profitability has a tradeoff between an accepted level of risk and profits. An organization often take higher risks are taken when anticipating a higher rates of return (Finkler & Ward, 2006). Viability has a negative effect on profitability. Organizations with a greater liquidity have more safety, but having...
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...Generally Accepted Accounting Principles Tonya Krell Phoenix Generally Accepted Accounting Principles Accounting standards that record and report financial information in a consistent manner is known as Generally Accepted Accounting Principles (GAAP). There are four primary financial statements in which GAAP is used to guide the rules and requirements. The financial statements include a balance sheet, statement of operations, statement of cash flow, and statement of changes in net assets (Cleverley, Song, & Cleverley, 2011). Professionals, to prepare financial documents based on a common standard, implement the principle. GAAP is beneficial to companies as it alleviates the difficulties of comparing a company’s financial statements, establishes creditworthiness of a company, and provides financial strength ("How does GAAP aid in health care," n.d.) GAAP is reinforced by eight accounting concepts. The concepts are as follows: (a) Entity concept, (b) Going-concern concept, (c) Matching principle, (d) Cost principle, (e) objective evidence, (f) Materiality, (g) Consistency, and (h) Full disclosure (Finkler, Jones, & Kovner, 2012). This paper provides a description of each concept and how the concept relates to health care. In accounting there must be an entity that is used to prepare financial statements such as balance sheets for the health care organization. This can include the organization as a whole but typically is broken down into units or departments. Identifying...
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...Generally Accepted Accounting Principles INTRODUCTION Generally accepted accounting principles (GAAP) are procedures, standards and accounting principles that an organization uses to complete financial statements. It is important for nurses seeking roles in the position management to understand the financial concepts and include themselves in the process of creating the organizational budget. This paper will describe the GAAP as related to healthcare and the intention of each principal. Within the healthcare setting financial statements must be audited by CPAs which makes GAAP relevant in healthcare. The most important GAAP concepts are: 1. Entity concept 2. Going-concern concept 3. Matching principle and cash versus accrual accounting 4. Cost principal 5. Objective evidence 6. Materiality 7. Consistency 8. Full disclosure Entity Concept The entity concept is the organization or person that is the focus of the financial statements. As it relates to health care a large healthcare organization that includes a university, hospital, research lab and outpatient center would be considered an entity. When preparing financial statements each building itself would be seen as an entity to ensure for accounting purposes the accounts payable and accounts receivables are accurate per entity. As the chief financial officer, this one option short that each entity remains within their budget. Going-concern concept The second goal of GAAP is that...
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...Generally Accepted Accounting Principles Carrie Scrivner HCS/571 March 10, 2014 Dr. Patricia Jenkins Generally accepted accounting principles, also known as GAAPs, are a set of rules and regulations that organizations use to prepare and maintain their financial statements. These principles are guidelines that all publicly held companies must use. They protect investors from financial misuse. GAAP in health care aids the organization show its financial strength and establish its ability to get credit. The first GAAP is the accounting entity. This principle states that the business is separate from the owners and board members. The owners and/or board members’ assets and liabilities are kept separate from the organizations. If a physician owns his office, then the accountant will keep his personal assets and liabilities separate from those of the medical office. This principle also states that once the boundaries have been set, then they should not be changed. Money measurement is the next GAAP. This principle states that all transactions in a financial statement must be measured in money. If it is not measured in money, then it should not be placed in the financial statement. The hospital does patient surveys. These surveys are not measured in money. Therefore, the surveys should not be placed in the financial statements. However, if the hospital buys new beds for the PCU unit, then this transaction can and should be placed in the financial statement...
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...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...
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...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...
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...Generally Accepted Accounting Principles Healthcare is continually evolving and has become a business and an economic force in current society. Historically, stakeholders such as physicians and other health care professionals are adept at making clinical and health-related decisions. However, they often lack the ability to make informed financial decisions. Many have come to realize financial criteria and cost-effective health care delivery is paramount to the success of modern healthcare systems. Therefore, stakeholders recognize the need and relevance of financial knowledge to make informed decisions (Cleverly, Jones & Cleverly, 2011). Concept and purpose of Generally Accepted Accounting Principles Organizations, including health care facilities, employ accountants to oversee the financial endeavors of the organization. Generally accepted accounting principles are rules created by the Financial Accounting Standards Board to regulate financial accounting and prepare the organization’s financial statements (Finkler, Kovner & Jones, 2007). Generally accepted accounting principles or GAAP is widely used in the health care industry(Pounder, 2011). The principles provide industries with a framework for tracking and monitoring the organization’s financial circumstances. GAAP helps in preparing the four most important financial statements relevant to the facility’s economic well-being. The financial statements are balance sheets, statements of operation, cash flow, and change in...
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...CHAPTER 2 Generally Accepted Accounting Principles Introduction Need of Accounting Principles Generally Accepted Accounting Principles Characteristics of Accounting Principles Objectivity Application Reliability Feasibility Understandability Accounting Concepts Separate Entity Concept Money Measurement Concept Dual Aspect Concept Going Concern Concept Cost Concept Period Accounting Period Concept Periodic Matching of Costs and Revenues Concept Realisation Concept Accounting Conventions Conservatism Consistency Materiality Full Disclosure Your Check Your Understanding Descriptive Questions Interview Questions Accounting for Managers 24 2.1 INTRODUCTION Accounting is the language of business. When we speak in any language, our intention is our ideas are to be understood by others. Language can be understood only when words used by us convey the same meaning to the listener. Both the speaker and listener should mean the same for the words used. Equally, every language has grammar of its own. When we write or speak, we follow the principles of grammar. Similar is the case with accounting. Most of the activities, be it official, social or personal, are guided by a set of certain rules or conventions. Some of the conventions are as follows: ♦ In India, we always drive on the left hand side of the road. ♦ Overtaking the vehicle, either two-wheeler or four-wheeler, is to be made on the right side, alone. ♦ As a citizen of India...
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...Identify the GAAP used to create the financial plan. Explain the importance of each GAAP to the financial plan Generally accepted accounting principles (GAAP)—A set of rules used as a basis for financial reporting. Some key GAAP: a. Going concern—Financial statements are prepared based on the assumption that the organization will remain in business for the foreseeable future. If that is not likely to be the case, it must be disclosed. “the auditor has a responsibility to evaluate whether there is substantial doubt about the entity’s ability to continue as a going concern for a reasonable period of time.” Administration and the auditor have a responsibility to evaluate and are required to indicate if the hospital has the ability to make enough money to stay afloat or avoid bankruptcy. is required to indicate that in his or her report on the financial statements. b. Conservatism—In reporting the financial position of the organization, sufficient consideration should be given to the various risks the organization faces. There is a tendency to anticipate possible losses, but not to anticipate potential gains. Hospital’s leadership and its independent accountant should choose the alternative that will be least likely to overstate assets and income c. Matching—Expenses should be recorded in the same accounting period as the revenues that they were responsible for generating. To get a fair reflection of the results of operations for a specific period of time...
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...Elaborate GAAP Principles with suitable examples. GAAP GAAP stands for Generally Accepted Accounting Practice. It is a common set of accounting principles, standards and procedures that companies must follow when they compile their financial statements. GAAP is a combination of authoritative standards issued by Financial Accounting Standards Board and the commonly accepted way of recording and reporting accounting information. GAAP improves the clarity of the communication of financial information. Relevant Information: Affects the decision of its users Reliable Information: Is trusted by users Comparable Information: Used in comparisons across years and companies GAAP Principles There are eight GAAP principles which are explained below:...
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...GAAP Generally Accepted Accounting Principles There are notable differences between managerial accounting and financial accounting. Emphasis on the financial consequences of the past activities, mandatory external report and precision are only some of the elements financial accounting has different than the managerial accounting. Economic performance of a business is measured through the means of financial accounting. Resulting from the data analysis of the financial accounting are income statements and balance sheets. The main difference, however, between the two types of accounting is the need to follow or not the GAAP, or Generally Accepted Accounting Principles. Business transactions are recorded with the help of GAAP. The statements of GAAP are not strict rules, but mainly guidelines to help a business properly record its financial activity. The statements should follow a minimum regularity for reporting statements. Following the GAAP principles gives more creditability to the activity of the business, standing as proof of its correctness and precision to the outside business environment. A report abiding with these principles is easier read and accepted by analysts and stockholders. The GAAP regulates several principles. Among these, great importance have the accrual basis accounting principle, the economic entity assumption principle, the revenue recognition principle, the relevance, consistency and reliability principle, the cost principle and the materiality principle...
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...financial accounting. Level of Learning: Easy 28. The primary focus for financial accounting information is to provide information useful for: A. Option A B. Option B C. Option C D. Option D AACSB: Reflective thinking Bloom's: Knowledge Learning Objective: 01-01 Describe the function and primary focus of financial accounting. Level of Learning: Easy 29. Which of the following is not true about net operating cash flow? A. It is the difference between cash receipts and cash disbursements from providing goods and services. B. It is a measure used in accrual accounting and is recognized as the best predictor of future operating cash flows. C. Over short periods of time, it may not be indicative of long-run cash-generating ability. D. It is easy to understand and all information required to measure it is factual. AACSB: Reflective thinking Bloom's: Knowledge Learning Objective: 01-01 Describe the function and primary focus of financial accounting. Level of Learning: Medium 30. Which of the following groups is not among financial intermediaries? A. Mutual fund managers B. Financial analysts C. CPAs D. Credit rating organizations AACSB: Reflective thinking Bloom's: Knowledge Learning Objective: 01-01 Describe the function and primary focus of financial accounting. Level of Learning: Medium 31. Which of the following was the first private sector entity that set accounting standards in the United States? A. Accounting Principles...
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...an organization to ensure that all rules and regulations within the organization are being followed. The third element of financial management is organizing. Organization is important because it guarantees that the organization is working at its best and it is organized while directing the medical office to work and fix problems that may come. The last element of financial management is decision making. All decision relies on information, and evaluation. Decision making works along with the planning, controlling and organizing by gathering information and helping to make a decision. Financial management is important in healthcare financial plans. Companies can not function without the proper financial planning. Generally Accepted Accounting Principles (GAAP) gives guidelines for organizations to follow in regards to their financial report. Misconduct, fraudulent behavior and abuse happen every day in...
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...Sources of Generally Accepted Accounting Principles A set of standards developed and universally practiced are called Generally Accepted Accounting Principles (GAAP). Generally accepted means that an authoritative accounting rule-making body, has accepted as appropriate due to their universal application. Otherwise each company would have created their own standards. There are some organizations that are very important in the development of GAAP, such as the Securities and Exchange Commission (SEC), the American Institute of Certified Public Accountants (AICPA), the Financial Accounting Standard Board (FASB) and the Government Accounting Standard Board (GASB). The SEC helps to develop and standardize financial Information for the stockholders under the Securities and Exchange Act of 1933 and 1934. The AICPA contributes with committees and boards. FASB establishes and improves standards of financials accounting and reporting for the guidance and education of the public. GASB, was created due to the financials prepare by the state and local government were not compare to reports prepared by private organization. Generally Accepted Accounting Principle has authoritative support. The hierarchy that define the meaning of GAAP included FASB standards and interpretation and staff positions, Accounting Principle Board Opinions (APB), which determines appropriate accounting practices and the AICPA accounting Research Bulletin. These standards identify the sources of the accounting principle...
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