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Accounting Systems in Health care

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That from 2002 to 2007, the expenses of hospital beds have increased by 33%, where the operational effectiveness of hospitals has decreased by 20%, which makes the implementation of accounting system a significant step for the healthcare organizations to make the segment cost effective and to improve the quality of management and services (Langabeer et al.The healthcare system in the present times is highly complex which has resulted in the spread of accounting to every area of healthcare organizations. In order to be successful, healthcare managers, irrespective of their specific field of concern, must have an understanding regarding accounting and financial management (Finkler et al. The motivating force behind the development of accounting system in healthcare organizations is transformation from remuneration for service and cost oriented compensation to prospective payment system (PPS) and capitation as the leading forms of payment to healthcare service providers. Initially, healthcare organizations were interested in the departmental expenses which concentrated on the cost of producing only specific services such as laboratory assessment and radiology inspection among others. However, the departmental expenses have been unable to concentrate on products being manufactured by the hospitals and healthcare services delivered to the patients. Thus, the concept of ‘Diagnostic Related Groups’ (DRG) appeared in accounting system of healthcare segment in order to evaluate the course of cost for different products and services. The improvement that has occurred in the healthcare segment is ‘product line costing’, the key purpose of which is to make the payment and reimbursement system convenient and to make the operations effective (Toso, n.Product Line Costing: In product line costing, the relationship between products’ price and costs is recognized in order to understand the financial influence of different types of patients on healthcare organizations. Product line costing focuses on accruing different costs and allocating them to products or services (Toso, n.Job Order Costing: Job order costing is utilized directly to allocate expenses to patients that consume diverse extents of resources. It averages the expenses on small number of patients. Job order costing necessitates comprehensive information to be recalled and generates more precise cost information for healthcare organizations (Toso, n.Process Costing: Process costing is
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