General Accepted Accounting Principals Essay

735 Words Mar 1st, 2011 3 Pages
Generally Accepted Accounting Principles Health care organizations financial statements are the key tools to show the economic stability of an organization and guide leadership in making informed decisions. The Generally Accepted Accounting Principles (GAAP) is basic assumptions, and principles of accounting to determine the financial position of an organization. These principles offer consistency across health care organizations, and businesses maintaining track of the organizations fiscal returns, detailed balance, and outstanding debt. Generally Accepted Accounting Principles help guide health care organizations through the economic framework of accounting (Finkler & Ward, 2006). Over the next several pages I plan to discuss the …show more content…
Cost Principle The accounting for purchases of a health care organization must be at cost price and not the fair market value at time of purchase. An example, if an asset is purchases, entering the price paid for the purchases is considering be base for all future accounting.
Object Evidence Principle This principle states accounting will be on the basis of objective evidence. If different people are looking at the evidence all will arrive at the same conclusion for the transaction. This means objective accounting entries on facts and not personal feelings, or opinions. The source document for transactions is usually the best objective evidence available (Finkler & Ward, 2006).
Materiality Principle Materiality principle allows accountants to use generally accepted principles for determining immaterial cost in a budget. An auditor tracking individual staples or gem clips is a mundane task; materiality permits certain transactions to be left out of the organizations financial statement because of the insignificance (Cleverly & Cameron, 2007).
Consistency Principle Health care organizations using the consistency principle refers to the state of accounting rules, concepts, principles, and practices consistently. When consistency is there, the results and stability of information from one period to the next auditors can easily make comparisons. If a change in accounting methods occurs