Accounting Principles

Topics: Finance, Balance sheet, Asset Pages: 3 (779 words) Published: July 8, 2013
Running head: ACCOUNTING PRINCIPLES

Generally Accepted Accounting Principles
P G
HCS 571
June 5, 2013

Generally Accepted Accounting Principles
Generally accepted accounting principles (GAAP), are standards and guidelines for financial accounting, and reporting, (Office of Financial Management, 2012). There are guidelines in effect for most organizations; GAAP ensures that the finances of an organization are correct. According to Cleverly, Song, and Cleverly (2011), GAAP describes the “body of rules and requirements that shape the preparation of the four primary financial statements,” (p. 182, para 3). The four financial statements are balance sheets, statement of operations, statement of cash flows, and statement of changes in net assets, (Cleverly, Song & Cleverly, 2011). According to the Office of Financial Management (2012) website, the Governmental Accounting Standards Board (GASB) has a hierarchy for state and local governments pertaining to GAAP; (1) GASB statements and interpretations, (2) GASB technical bulletins, (3) American Institute of Certified Public Accountants (AICPA) practice bulletins, and (4) Implementation guides. Accounting principles are guidelines that businesses and organizations use to prepare financial statements. The principles of accounting include: accounting entity, money measurement, duality, cost valuation, and stable monetary unit, (Cleverly, Song & Cleverly, 2011). Stable monetary unit deals with inflation and the value of a dollar. The monetary unit of measure is a dollar, (Cleverly, Song & Cleverly, 2011). The value of the dollar remains the same however; inflation does play a role in the value of the dollar and how much the dollar can purchase. The amount of money the hospital spends on items in 10 years may not be the same, when compared to today. Cost Valuation deals with market value, and replacement cost valuation, (Cleverly, Song & Cleverly, 2011). The value at the time of acquiring a...

References: Cleverly, W. O., Song, P., & Cleverly, J. (2011). Essentials of health care finance (7th ed.). Sudbury, MA: Jones and Bartlett Learning.
Office of Financial Management. (2012). Retrieved from http://ofm.wa.gov
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