Accounting Principles and Health Care Essay

There atomic number 18 no lump account tenets that apply to wellness cover. However, thither argon cinque generally authentic guiding principles used in the solicitude of the fiscal aspects of wellness direction caution (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles ar important in dread financial information and managerial accounting and how the principles relate to health awe (Cleverly et. al. ). The five principles hold, accounting entity, bills measurement, duality, cost valuation, and abiding monetary whole.Each principle and how it relates to health care is discussed in the following (Cleverly et. al. ). account Entity An accounting entity is the business or friendship that performs clear economic activities, separate from whatsoever personal economic endeavors (Accounting Tools, 2010). An accounting entity requires financial records that define financial activities (Cleverly et. al. ). In health care, accounting entities dope be hospitals, clinics, or other entities that are part of a larger corporation.See more affectionate process essayAccounting is adapt to measure and report the financial activities of the entities under(a) consideration. Money bar Money Measurement is very simply, a course to prevent count and records of the incoming and outgoing tax income of the accounting entity. This is not an easy business and involves consideration of various issues (Cleverly et. al. ). Resources and liabilities live to be considered and calculated to determine accurate coin measurement. Resources are also referred to as assets. scarce resources are things, supplies, gold, and other things or resources that are needed by the company in order to generate money. These resources are circumscribed and necessary to the entities operation (Cleverly et. al. ). This whitethorn include nursing staff for heath care organizations. Other scarce resources for health care organizations may include buildings, ma ny antithetical kinds of medical supplies, medications, and other supplies to care for patients and give the organization. Assets are the resources that the organization has and the money generated.Liabilities are resources that are owed for services, supplies and other things that the organization has acquired. The elevated goal of any business is for the assets to be greater than the liabilities (Cleverly et. al. ). Duality Duality is a fair mathematical equation or rather, it seems simple. The equation states, The mensurate of assets essential of all time equal the combined repute of liabilities and equilibrium interest, which we have called net assets. (Cleverly et. al. pg. 185 para. 1) This requires balancing reports most changes in either side of the equation.In health care, for instance, changes such as bargain for supplies, receiving comportment for services, or paying the electrical bill are all proceeding that require balancing the books, so to speak, so tha t the equation is withal equal. Cost paygrade Cost Valuation can be defined as choosing the right bell for services, supplies and other things of value (Hutton, 2005). Choosing the right value may be found on the history of what the entity has paid that is reflected by money measurement or may be based on other measures of what a cost should be (Cleverly et. al. . Market value is a expression to assess a cost value.This seems to be favorite way with many organizations. This method is not considered objective, until now and can provide different opinions on what an item is worth, making costing catchy (Cleverly et. al. ). Replacement value is another way of choosing the right price. This gives the cost of how much money it would take to replace an item or service (Cleverly et. al. ). In health care for instance, when costing an expensive piece of medical equipment, replacement value makes more mavin than market value.The organization may gravel different quotes on market va lue but replacement value should be more consistent and reliable. Stable fiscal Unit The stable money unit is our country is the long horse. The horse is used in money measurement and other principles that have money values attached. The dollar is evermore the dollar but the value can change based on the miserliness and inflation (Cleverly et. al. ). An example of how this might encroachment health care is, suppose the organization, based on replacement value, has allotted a certain amount of money to purchase an expensive medical devise.Before the purchase has been made, the dollar reducings in value or is unavailable and has to be imported. The value of the dollar has changed the country from which the item is imported from may have dwelld a decrease in the value of the United States Dollar. The dollar is still a stable monetary unit though there may be fluctuations due to inflation or other events.Conclusion There are no specific hard rules that determine accounting the five guiding principles of accounting are used to help organizations fete track of the entitys assets and liabilities.The principles are not perfect but serve as a guide to costing and money measurement. The stable money unit in our country is the dollar. The dollar may experience fluctuations in value but is still considered stable and how the United States measure and pay for any expenses. The five principles seem simple and as one looks into each principle further, it is noted that there are complexities and problems that must remain in the forefront of the accountants mind when keeping up with the financial end of any organization.