March 16, 2013
Generally Accepted Accounting Principles (GAAP) in Health Organizations The increasing pressure of the cost in providing health care services to the public and the inflation in the health sector that has resulted in inflated costs of providing medical and clinical health care has prompted health providers and nurse managers to rethink accounting practices and their profitability index. In addition, health sector has witnessed an increase in the level of competition. Managers of these health institutions have, therefore, advanced their managerial skills by implementing the Generally Accepted Accounting Principles (GAAP) in their operations to remain competitive and to break-even. The GAAP are uniform accounting policies and guidelines that health institutions implement to help them to determine their financial position and performance with a given accounting period (Flood, 2012). Therefore, GAAP are critical guidelines that reflect the financial position and stability of the health providers. Besides, GAAP are essential in setting a financial foundation for the health institutions with respect to their financial performance. The following accounting policies and principles play a vital role in the laying of a financial foundation for the health organizations: entity concept, matching principle, cost principle, going-concern, full disclosure, materiality, consistency, and objective evidence (Kimmel, Weygandt & Kieso, 2011). This paper aims at providing a brief description of these GAAP principles and their relevance in the health sector.
The Relevant Concepts
This accounting principle asserts that health care institutions should operate sound and realistic financial policies in order for the organization to remain operating over an infinite period....