Accounting Principles and Health Care Essay

There ar no formal accountancy principles that apply to health occupy. However, there are five generally certain guiding principles apply in the management of the financial aspects of health care management (Cleverly, Song & Cleverly, 2011). Understanding the five guiding principles are grievous in understanding financial information and managerial accounting and how the principles consociate to health care (Cleverly et. al. ). The five principles accommodate, accounting entity, m whizzy totalment, duality, personify valuation, and horse barn monetary unit.Each principle and how it relates to health care is discussed in the avocation (Cleverly et. al. ). Accounting Entity An accounting entity is the business or corporation that performs clear economical activities, separate from any personal economic endeavors (Accounting Tools, 2010). An accounting entity requires financial records that describe financial activities (Cleverly et. al. ). In health care, accounting entiti es can be hospitals, clinics, or another(prenominal) entities that are part of a larger corporation.See more than Social process essayAccounting is geared to measure and embrace the financial activities of the entities under consideration. Money Measurement Money Measurement is real simply, a way to keep count and records of the incoming and outgoing taxation of the accounting entity. This is not an easy task and involves consideration of various issues (Cleverly et. al. ). Resources and liabilities aim to be considered and calculated to determine accurate money measurement. Resources are as well as referred to as assets.Scarce resources are things, supplies, money, and other things or resources that are unavoidable by the company in order to generate money. These resources are curb and necessary to the entities operation (Cleverly et. al. ). This may include nursing staff for heathland care administrations. Other scarce resources for health care organizations may include buildings, many different kinds of medical checkup supplies, medications, and other supplies to care for patients and maintain 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 rarefied goal of any business is for the assets to be greater than the liabilities (Cleverly et. al. ). dichotomy Duality is a simple mathematical equation or rather, it seems simple. The equation states, The order of assets must always equal the combined value of liabilities and residual interest, which we get down called net assets. (Cleverly et. al. pg. 185 para. 1) This requires equilibrate reports about salmagundis in either side of the equation.In health care, for instance, changes such as buying supplies, receiving payment for services, or paying the electric bill are all transactions that require balancing the books, so to speak, s o that the equation is still equal. be Valuation Cost Valuation can be defined as choosing the make up footing for services, supplies and other things of value (Hutton, 2005). Choosing the right price may be base 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 way to assess a cost value.This seems to be favorite way with many organizations. This method is not considered objective, however and can provide different opinions on what an item is worth, making costing difficult (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 foot of medical equipment, replacement value makes more sense than market value.The organization may receive different quotes on market value notwithstanding replacement value should be more consistent and reliable. Stable pecuniary Unit The abiding money unit is our country is the dollar. The dollar is used in money measurement and other principles that have money determine attached. The dollar is always the dollar hardly the value can change based on the economy and inflation (Cleverly et. al. ). An example of how this might trespass health care is, suppose the organization, based on replacement value, has deal out a certain amount of money to purchase an expensive medical devise.Before the purchase has been made, the dollar decreases in value or is inaccessible and has to be imported. The value of the dollar has changed the country from which the item is imported from may have visualized 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 account ing the five guiding principles of accounting are used to military service organizations keep 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 detain in the forefront of the accountants mind when keeping up with the financial end of any organization.