Health Care Accounting Because Health Care Focuses Essay

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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 financial. Indeed, human lives might be at stake. For this reason, cost principles and generally accepted accounting principles can be applied when considering finance in the healthcare field. In a practical sense, two articles have been chosen to demonstrate accounting principles in a practical sense, the first of which concerns a single-player healthcare financing system, while the second focuses on pharmaceutical companies and their role in financing drug trials.

In the accounting field, there are four main important principles that must be taken into account in terms of the ethical management of funding, of which the first is the cost principle. This principle dictates that the actual cost of assets should be recorded rather than their market value or their estimate in terms of inflation adjustment. The actual cost of assets would then create a more accurate recording of inventory and other purchases in the accounting ledger. In other words, the actual cost of the assets at the time of purchase is recorded rather than an estimate based on what their cost value at a later time.

The second principle focuses on revenue.

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According to this principle, revenue should be recorded at the time of earning rather than at the time when payment is received. Such recording will prevent accounting errors as a result of delayed payments.

Third, the matching principle states that expenses and revenue should be matched. Expenses are recorded at the time when they make a contribution to revenue, rather than at the time when they are generated. In this way the profitability of goods and services can be evaluated easily. It also creates a clear connection between expense and income, matching goods and services directly with the revenue that they bring in. Expenses such as administrative costs and employee salaries are recorded as expenses for the current period and cannot be directly linked with revenue.

Finally, the disclosure principle means that all financial information should be released in a clear and comprehensible way. The disclosure should also be balanced against the cost of generating the information and releasing it. Financial statements should be included either in the body of the statements, as footnotes, or in the form of supplemental documents. While the disclosed information should be sufficient to drive corporate and executive decision-making, information that is unnecessary or redundant should be streamlined in such a way as to minimize the cost of disclosure.

Generally accepted accounting principles, also known as GAAP, involves a number of components, of which the first is competence. This means that accounting and financial professionals should not only have a sufficient educational background….....

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