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Generally Accepted Accounting Principles
Generally accepted accounting principles is a set of broad guidelines, rules, and requirements followed by financial preparers’ used in preparing an organization’s financial statements, (Cleverley, Song, & Cleverley, 2011). Health care organizations financial statements are the key tools in presenting and projecting current and future economic viability, (Finkler, Kovner, & Jones, 2007). The financial prepared by organization’s are as follows: 1. “Statement of financial position (or balance sheet),” (Finkler et al., 2007, p. 96). The balance sheet follows the basic paradigm of an organization’s assets equaling the organization’s expenses plus the owner’s equity in the organization, (Finkler et al., 2007). On paper the equation is: “Assets = Liabilities + Owner’s equity’, (Finkler et al., 2007, p. 96). Assets are defined as items owned by an organization. This includes more than just buildings and equipment. The assets may also include payments due to an organization at a given point in time, (Finkler et al., 2007). Liabilities are defined as promises of payment to creditors and payment of other obligations, (Weygandt, Kieso, & Kimmel, 2007). The owner’s equity is the part of the basic accounting that accounts for the owner’s profit or losses. This is the sum of assets minus liabilities on the balance sheet, (Weygandt et al., 2007). 2. “Statement of operations (or income statement”, (Finkler et al., 2007, p. 96). According to Cleverley et al., the income statement includes an organization’s incomes and liabilities during a certain time frame, (2011). 3. “Statement of changes in net assets (or changes in equity)”, (Finkler et al., 2007, p. 96). The statement of changes in net assets” reconciles the net assets or owners’ equity from the end of the previous year to the end of the current year,” (Finkler et al., 2007, p. 115). This statement is important to health care organizations...
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