GAAP
Generally Accepted Accounting Principles in Health Care
GAAP (generally accepted accounting principles) in health care
Within the United States, all businesses that keep financial records must adhere to GAAP or generally accepted accounting principles, including both for-profit and not-for-profit healthcare entities. "GAAP is not a single accounting rule, but rather the aggregate of many rules on how to account for various transactions" (Kramer & Applebaum 2013). The first two principles of GAAP are that "financial records must be separately maintained for each economic entity" in a separate fashion and that "an economic entity's accounting records include only quantifiable transactions. Certain economic events that affect a company, such as hiring a new chief executive officer or introducing a new product, cannot be easily quantified in monetary units and, therefore, do not appear in the company's accounting records" (GAAP, 2013, Houghton Mifflin Harcourt). These details may be included as qualitative data and, in fact, may be necessary to insert as footnotes to reports to investors to give a full financial picture of the entities' future financial health. Finally, all entities, regardless of industry type, are recorded according to the going concern principle, which suggests that there is an assumption that the entity will exist indefinitely (GAAP, 2013, Houghton Mifflin Harcourt).
Unique challenges of healthcare accounting
Some unique characteristics of financial reporting in healthcare may be manifested, however, when creating a report compliant with GAAP. For example,...
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