General Accepted Principles

807 Words Feb 19th, 2013 4 Pages
Generally Accepted Accounting Principles
HCS/571

Generally accepted accounting principles, better known as (GAAP) discloses statements and reports financial information dealing with businesses and organizations. They are rules made by the Financial Accounting Standards Board (FASB) in which are commonly used in the health industry to maintain the decisions of the organization. GAAP gives detailed information to investors about the budget of the organization and their debt. GAAP includes the most common principles used in the health care setting. They are; the entity concept, going-concern concept, matching principle and cash vs. accrual accounting, cost principle, objective evidence, materiality, consistency, and full disclosure
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Accountants are able to determine the accrual accounting by focusing on the matching principle (Finkler, Kovner, and Jones, 2007). With the matching principle organizations and businesses are able to record expenses and revenues that were accumulated in the same year to match. Accrual accounting is necessary because it gives a better explanation of expenses accrued annually.
Cost principle
The cost principle is anything the business or organization purchases to get. For instance hospitals need equipment. After buying brand new equipment over the years it will depreciate in value. The reported value will be known as a net book value because of the change in cost over time (Finkler, Kovner, and &, 2007).
Objective evidence Due to mishaps with the cost principle and inconsistency of the balance sheet, objective evidence is used. Objective evidence is providing proof objectively of financially statements and expenses by different groups of individuals that are expected to agree (Finkler, Kovner, & Jones, 2007). If a patient leaves the hospital with a device or surgery, knowing how much in value the organization spent on the patient assets can help determine the precise amount spent to receive it.
Materiality
Materiality relates to errors or discrepancies within the financial information. Having a hospital to partner with another hospital and ask for help financial can affect the partnership if the financial information is unclear
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