Gauge for the performance of the system

The main objective of financial accounting systems in a healthcare system will be to provide information about the financial position of the system.

An accounting system will also act as a “gauge for the performance of the system” and the changes that need to be effected in order to attain the individual goals that the system is designed to achieve (Pratt, 2009). Providing these reports in a fair and factual manner ensures the healthcare system runs efficiently and effectively.

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Managers and owners mostly depend on these reports to make decisions that impact on the system. Investors will also use the reports as a backbone to asses the viability of the system and also to justify their investments. Fair and factual financial reports will also assist the government in determining taxes and incentives for the system correctly and accurately.

Banks and other financial lending institutions may require the reports to determine whether the healthcare system qualifies for financial assistance that they may seek. With all these purposes it is often inevitable for the financial reports to be fair and factual so as to enjoy the numerous benefits (Cleverly and Cameron, 2007).

Since there are usually two types of healthcare entities that is profit entities and non profit entities, the reports may differ in one way or another. Non profit entities unlike the profit entity does not distribute its profits to shareholders, it instead ploughs back the profits to the healthcare system.

Most financial statements for non profit healthcare system will tend to simpler that those for profit organizations. Non profit entities financial reports will basically consist of balance sheets which may be accompanied by “statement of activities” while that of a profit entity will consist of “profit and loss” financial reports.

Another difference would lie in the fact that most non profit healthcare entities are exempted from tax and thus their financial reports will be geared towards getting exempted. Profit entities on the other side are usually taxed and thus they have to conform to government regulations so as to be taxed accurately (Cleverly and Cameron, 2007).

References:

Cleverly, W. O. and Cameron, A. E. (2007). Essentials of healthcare finance. London: Jones & Bartlett Learning

Pratt, J. R. (2009). Long-Term Care: Managing Across the Continuum (3rd Edition). London: Jones & Bartlett Learning