Accounting Principles and Health Care Essay

943 Words Apr 10th, 2012 4 Pages
Accounting Principles and Health Care
Samantha Mrazek
HCS 571
March 19, 2012
John Hodnette

Accounting Principles and Health Care There are no formal accounting principles that apply to health care. However, there are five generally accepted guiding principles used in the management of the financial aspects of health care management (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles are important in understanding financial information and managerial accounting and how the principles relate to health care (Cleverly et. al.). The five principles include, accounting entity, money measurement, duality, cost valuation, and stable monetary unit. Each principle and how it relates to health care is
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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 sense than market value. The organization may receive different quotes on market value but replacement value should be more consistent and reliable. Stable Monetary Unit The stable money unit is our country is the dollar. The dollar is used in money measurement and other principles that have money values attached. The dollar is always the dollar but the value can change based on the economy and inflation (Cleverly et. al.). An example of how this might impact 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 decreases 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 experienced 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 govern accounting; the five guiding principles of accounting are used to help organizations keep track of the entity’s

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