Generally Accepted Accounting Principles Paper Essay

Generally Accepted Accounting PrinciplesIn a ground of finances, Generally Accepted Accounting Principles seem to play a commodious role. Generally Accepted Accounting Principles, or GAAP, is define as the pot of guidelines and rules which the financial firms adhere in their work. GAAP is useful due to the temperament of cosmos able to standardize the methods for the presidential terms to follow, and it establishes consistency from year to year in documents such(prenominal) as financial statements (Cleverly, Song & Cleverly, 2011). Healthcargon is inevitably a business like any some other according to the authors, and such healthcare organizations are sure to benefit from GAAP. Cleverly et al (2011), attempts to teach the contributor the five of the principles in their work. They are as follows Accounting Entity, Money Measurement, Duality, exist Valuation, and Stable Mo lootary Unit. To apply these essential principles to healthcare organizational settings, it is of impo rt to study how each of the principles are defined.Principle 1 Accounting EntityIt is verbalise that accounting entity is an organization which is involved in economical activities with own assets and resources which should be accounted (Cleverly, Song & Cleverly, 2011). The authors also state that if the definition is not properly determined, evaluations readiness become even useless and misleading. Legal entity and accounting entity are different. This sum that sometimes it is not apparent for the firms define the accounting entity, as other groups such as universities and government might be involved with the organization as well. Cleverly et al (2011) gives a great example of what could kick the bucket if not all aspects are accounted for. In healthcare organizations, the idea of eruption benefits such as bonus wages being paid in municipal basis might not be visible to the hospitals accounts. This could possibly cause understatement of the expenses, which could affect th e finances of the hospital as a whole.Principle 2 Money MeasurementMeasurement of bullion is not an easy task in a business setting. in that respect areresources essential for running a business and other economic obligations the business has to provide and meet. This could be applied in the same bureau for healthcare organizations. Assets are usually greater than the liabilities (Cleverly et al, 2011). Liabilities are resources from another entity such as bank loans. With the presence of liabilities, owners interests are gained to the entity which provided the loans. When the firms earn these elements into account, they should acquire a general idea of the accounting entitys assets and how they are utilized. When the liabilities are unpaid, then the lenders would then make the equity claims, unless the organization was a non-for profit healthcare organization. There are no equity claims for non-profit HCOs, and they average becomes the property of the state (Cleverly et al, 20 11).Principle 3 DualityDuality is defined as a simple equation. Assets of the business should equal the liabilities owed plus the winnings assets. Liabilities and net assets are always counted as assets. It is state that a significant number of HCOs use this principle with different transactions with lenders. Individual asset, liability and net asset always equals the same amount through the duality principle(Cleverly et al, 2011).Principle 4 Cost ValuationThis principle is used to deem the think of of the business. It involves historical cost, replacement value, and the market value. Although the asset is considered equal to the liabilities and the net assets, its market value is a different story. If the cost of investment is to a greater extent than the return, interventions need to be made to either sell the assets or glide by operation with resource cuts in the operation. Replacement cost would play a huge role in a hospital where the new and correct information technol ogies are being developed constantly. It is likely for the hospital a significant more money to replace the current technology being used and inflation.Principle 5 Stable Monetary unit concord to the authors Celverly et al (2011), stable monetary unit is the generalized value of a dollar whether it was now or then. For example, the dollar from 2000 would be considered the same value as the current dollar. This however, could cause problems due to inflation. healthcareorganizations could put themselves at significant cash deficit if the management does that put the inflation into account. Healthcare whether it is for profit or not, is still considered a business. Although non-profit HCOs are different at times, the HCOs still require resources, and Generally Accepted Accounting Principles assists the HCOs to stay unvarying and allows the managements to see the assets as a whole.ReferencesCleverly, W. O., Song, P. H., & Cleverly, J. O. (2011). Essentials of health care finance (7th ed.). Sudbury, MA Jones and Bartlett Learning..