January 30, 2012
Prof. Debra Vaughn
Health care organizations are complex and changing rapidly. The primary goal and function of health care organizations are to provide health care services to health care consumers. With that said, these organizations must also achieve financial stability and success to be able to provide the health care services to health care consumers. The financial leaders of these organizations must be able to ensure that financial strengths of the organizations to continue to provide services. There are two widely known type of accounting style that is used, which are the financial and managerial accounting. Financial accounting is used widely by health care organizations throughout the United States. This type accounting provides financial statements or reports to help the organizations leaders make important decisions for the organizations. There are four important financial documents that the health care organization provide for the organizations that impact and guide the organization directions. The four important financial documents are the balance sheet, statement of operations, statement of cash flows and the statement of changes in net assets(Cleverly, Song and Cleverly, 2011). Certain rules and requirements from generally accepted accounting principles, GAAP must be followed. GAAP are set of rules and requirements that were established by the Financial Accounting Standards Board, (FASB). Hospitals must make sure that their financial documents have been audited by Certified Public Accountant, (CPA) and are in compliant with GAAP (Finkler, Kovner, and Jones 2007). When preparing those four important financial documents, financial leaders must follow some accounting concepts or principles. There are six significant accounting principles that are often used by health care organizations to prepare their financial documents. The six principles are...