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Planning a Future Budget

 1. A financial plan, or budget, quantifies anticipated changes for the financial situation of an entity. What factors might be considered in planning a future budget?

 2. How is “Cost versus Matching” principles applied in health care or your organization?

According to the class e-book, Generally Accepted Accounting Principles (GAAP), are needed to establish a set of rules for organizations to follow to account for their financial performance. 

Organizations can choose from a relatively narrow set of alternative rules but must state this on their financial statement.  The GAAP gives rules that organizations must follow in their accounting practices.  The organization that established these rules is called the Financial Accounting Standards Board (FASB).  The GAAP constitutes many pages of detailed technical rules for organizations to follow.

An organization’s assets can be valued and if it appears the organization will remain in business an auditor must indicate in their report the organization is not a Going Concern.  The reason for this is if an organization goes bankrupt the organizations resources can be sold for substantially less that their value.
Conservatism is a rule that requires attention and consideration be given to the risks taken by an organization.  This is used by accountants to not overstate its value.

Matching involves reviewing expenses and revenues during the same time period to obtain a clear reflection of the results of operation.  Matching provides the basis for depreciation.
The Cost of an item is what was paid to acquire it or the value that was given to acquire it.
Objective Evidence rule entails financial reports being based on evidence as reasonable individuals could agree.  This rule requires property to be valued on financial statements based on the best available objective evidence.

Materiality -Material means large or significant and accountants must correct errors that are "material" in nature.  The significance is relative to the size and circumstances of the organization.
Consistency- Organizations must stay consistent with accounting methods or disclose the changes.
An example of how cost versus matching in my health care organization would be funding that was provided by the government to establish a 24 bed mental health unit.  The cost to build this facility and any other expenditure should be included in the same time period as the revenues are received to obtain a clear picture of where the money has gone and for any depreciation.


It is true that for any organization to survive, they must have a budgeted plan for their revenues as well as costs. This helps to avoid misappropriation and misuse of their facilities. It is essential that the organization maintains specific methods of accounting over time to avoid making reports that are misleading. In addition all the necessary information should be included to ensure that all departments are fairly represented and this also ensures that the organization factors in and takes care of the possible risks.

For instance, in a health care organization, they should factor costs of emergencies and wellness programs. Making of financial budgets and reports in any organization should involve all the key individuals. This in addition to reducing conflicts through agreements also factors in other people’s opinions which might be essential in running the organization. It also ensures that decisions are not made on the basis of incorrect information hence reduces errors. Planning is essential since by making plans an organization is bound to make the best investment.


 Finkler, S.A & Ward, D.M. (2006). Accounting fundamentals for health care management. Boston, MA: Jones and Bartlett. Retrieved from:
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