Generally Accepted Accounting Principles Nur/513

Topics: Generally Accepted Accounting Principles, Depreciation, Financial statements Pages: 4 (1120 words) Published: April 6, 2013
“Acounting is a set of rules, not a clear-cut science” (Finkler, Kovner, & Jones, 2007, p. 104). Generally Acccepted Acccounting Principles (GAAP) are rules, which have been established by Financial Accounting Standards Board (FASB). It is common set of accounting principles, procedures, and standards. Companies, including a health care companies, use GAAP to compile their financial statements. “GAAP are a combination of authoritative standards (set by policy boards) and simply the commonly accepted ways of recording and reporting accounting information” (Investopedia, 2013). GAAP includes following •Entity concept

Going-concern concept
Matching principle and cash vs accrual accounting
Cost principle
Objective evidence
Materiality
Consistency
Full disclosure
GAAP for health care organizations needed because it is financial organization. It is a company that investors could be investing; investors must have a minimum level of consistency in the financial statements when analyzing companies for investment purposes (Investopedia, 2013). Health care organizations expected to follow GAAP rules when reporting financial data in their financials. Generally Accepted Accounting Principles

Entity Concept
“The entity concept is a person or organization that is the focus of attention” (Finkler, Kovner, & Jones, 2007, p. 104). A large medical center can be an entity; as well smaller parts like hospital or medical school that makes up that medical center can be entities as well. When financial records are prepared, it is very important to identify which records belong to which entity. For example if one entity buys supplies from the other one and has not paid for it, it is important to identify which one is account receivable, and which one is account payable (Finkler, Kovner, & Jones, 2007). Going Concern

Going concern is implied presumption that the entity will continue business. If there is a possibility that entity will go out of business, it...
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