Accounting Fundamentals for Healthcare Management
This paper examines governmental and nonprofit accounting and discusses how it differs from commercial accounting. In the accounting field, there may not always be a clear distinction between the three types of organizations. The dividing line between business and nonbusiness organizations may depend on the incidence and relative importance of the nonbusiness characteristics found in an entity. The funds of such organizations are usually earmarked for specific purposes and must be used in accordance with laws, regulations, or contractual requirements.
One distinction of nonbusiness organizations is that they generally have no single indicator of performance, such as profit or net income. FASB:CS-4 provides two performance indicators for financial reporting for nonbusiness organizations:
They provide information about the nature and relationship between inflows and outflows of resources.
They provide information about service efforts and accomplishments.
FASB: CS-4 also sets forth the distinctive features of the nonbusiness organization:
Nonbusiness organizations receive significant amounts of resources from providers who have no expectation of receiving either repayment or economic benefits proportionate to resources provided.
Their primary operating purposes are other than providing goods or services at a profit or profit equivalent.
They have no defined ownership interests that can be sold, transferred, or redeemed, or that convey entitlement to a share of a residual distribution of resources in the event of the organization's liquidation.
The performance of nonbusiness organizations is usually not subject to direct competition in markets as is the performance of business enterprises. (Siegel & Shim, 2006).
The objectives that FASB: CS-4 identifies apply to general purpose financial statements issued by nonbusiness organizations. The objectives are intended to satisfy the needs of external users who generally cannot prescribe the information they want an organization to provide. Therefore, the objective of financial reporting is accountability to the public rather than investors. As a result, the accounting equation associated with nonprofit accounting is:
Assets...
Health Care Accounting Because health care focuses on a human concern, it is especially important to maintain a sense of ethics in this field. This becomes even more important when the concern is finance, accounting, and accountability. It is vital that accountability be maintained in healthcare funds, since the concern is often public funds and its application. If these are badly managed or unethically applied, the cost might be more than
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