Question

which of the following is accurate with respect to accounting for an investor-owned, for-profit hospital?

a) The hospital would be subject to the FASB (category A GAAP) and the AICPA Health Care Guide (Category B GAAP)

b) The hospital would use accrual accounting in the same manner as a commercial business with the exception of the recording of donations which would be recorded using the modified accrual basis

c) The hospital would be subject to the AICPA Health Care Guide and FASB pronouncements for not-for-profits, such as statements 116 and 117

d) The hospital must use the direct method of presenting operating cash flows

Answer 1

ANSWER:b) The hospital would use accrual accounting in the same manner as a commercial business with the exception of the recording of donations which would be recorded using the modified accrual basis

• Because they are engaged in business-type activities, Both governmental owned and private health care providers use the accrual basis of accounting and the economic resources measurement focus.
• First of All The AICPA Audit and Accounting Guide: Health Care Organizations applies equally to private not-for-profit and investor-owned but a profit Hospital not follow FASB 116 & 117
• Private-sector health care organizations use the three-category FASB format for the Statement of Cash flows, while public sector organizations use the four-category GASB format