5 Key Financial Documents a Hospital Must Keep in Kenya

Q: What are the 5 major financial statements that a hospital must have in Kenya?

The main financial statements generally include the Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements. However, your hospital also needs supporting accounting records such as patient billing records, trial balances, debtor and creditor schedules, bank statements, and VAT records. These supporting records provide the information needed to prepare and verify your financial statements.

Q: What kind of accounting do hospitals in Kenya use?

Hospitals generally use accrual-based accounting, where income and expenses are recognised when they are earned or incurred rather than only when cash is received or paid. This is particularly important for hospitals because you may provide treatment today but receive payment from SHA, an insurance company, or another third party several weeks or months later. Your accounting system should therefore be able to track revenue, receivables, claims, expenses, payables, assets, liabilities, and cash movements accurately.

5 Key Financial Documents that a Hospital Must Keep in Kenya

August 10, 2026

Estimated read time: 3 minutes

Table of Contents:

Introduction
So, What are the 5 Key Financial Documents that a Hospital Must Keep in Kenya

Patient Billing and Revenue Ledger
Trial Balance
List of Debtors and Creditors
Bank Statements
VAT Register

What Are the Main Financial Statements for a Hospital in Kenya?
What Does an External Audit of a Hospital in Kenya Cover?
Why Should You Keep Proper Financial Records for Your Hospital?
Recommended Articles
FAQs on Key Financial Documents that a Hospital Must Keep in Kenya
Do You Need Accounting and Audit Support for Your Hospital?

Introduction

Running a hospital involves much more than providing quality healthcare.

You also need to keep accurate financial records so you can understand how your hospital is performing, track money coming in and going out, comply with tax requirements, and prepare for an audit.

If you are wondering about the key financial documents that a hospital must keep in Kenya, it is important to understand that your hospital will need both formal financial statements and supporting financial records.

Documents such as your patient billing ledger, trial balance, debtors and creditors lists, bank statements, and VAT records provide the financial information needed to prepare reliable financial statements.

These records also make it easier for you, your accountant, management, and external auditors to understand your hospital’s financial position.

So, what financial documents should you keep?

Let’s check out this simple guide by Mugo & Company.

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So, What are the 5 Key Financial Documents that a Hospital Must Keep in Kenya?

1. Patient Billing and Revenue Ledger

Your patient billing and revenue ledger is one of the most important financial records your hospital should maintain.

It helps you keep track of the money your hospital earns from different services and patients.

Depending on your hospital’s operations, your revenue may come from:

Patient consultation fees
Inpatient and outpatient services
Theatre procedures
Laboratory services
Radiology and imaging
Pharmacy sales
Ambulance services
SHA reimbursements
Private insurance claims
Corporate medical schemes

Your billing records should allow you to see how much was billed, how much was collected, and how much remains outstanding.

For Example

Suppose your hospital provides treatment worth KES 80,000 to a patient covered by a private insurance company.
The hospital may provide the service today but receive payment from the insurer several weeks later.

Your records should therefore show the

Amount billed,
The amount approved,
The amount received, and
The outstanding balance.

This becomes particularly important when you have a large number of SHA or insurance claims.

An accurate patient billing and revenue ledger can help you:

Track your hospital’s revenue.
Identify unpaid patient bills.
Monitor outstanding insurance claims.
Detect revenue leakages.
Reconcile your billing system with your accounting records.
Prepare accurate financial reports.

In simple terms, your billing ledger helps answer one important question:

How much money has your hospital earned, and how much of it have you actually collected?

2. Trial Balance

The trial balance is another one of the Key Financial Documents that a Hospital Must Keep in Kenya

A trial balance is a summary of the balances in your accounting system at a particular date.

It normally contains your debit and credit balances and provides a starting point for preparing your financial statements.

Your trial balance may include accounts such as:

Revenue
Salaries and wages
Medical supplies
Pharmacy purchases
Rent
Utilities
Bank accounts
Cash
Accounts receivable
Accounts payable
Loans
Property and equipment
Tax liabilities

Think of your trial balance as a financial checkpoint.

Before your accountant prepares your financial statements, the trial balance can be reviewed to identify unusual balances, missing entries, posting errors, or other accounting issues.

For Example

If your hospital’s bank account should have a significant balance but the trial balance shows an unexpected amount, your accountant can investigate the difference before the financial statements are prepared.

A properly maintained trial balance therefore supports accurate financial reporting and makes the external audit process much easier.

3. List of Debtors and Creditors

Do you know exactly who owes your hospital money?

And do you know exactly how much your hospital owes its suppliers?

Your list of debtors and creditors helps you answer both questions.

Your Debtors	Your Creditors
Debtors are individuals or organisations that owe your hospital money.	Creditors are suppliers or other parties that your hospital owes money.
For a hospital, these may include: *Patients with outstanding bills* *SHA* *Private insurance companies* *Corporate medical schemes* *Other healthcare organisations*	These may include: *Medical suppliers* *Pharmaceutical suppliers* *Laboratory suppliers* *Equipment suppliers* *Utility providers* *Service providers*

Keeping an updated creditors’ list helps you know what your hospital needs to pay and when those payments are due.

It also helps your accountant ensure that outstanding liabilities are properly recorded in your financial statements.

For Example

If your hospital purchases medical supplies worth KES 500,000 on credit, the amount should not simply disappear from your records until you pay the supplier.
It should be properly recorded as an Amount Payable.

Maintaining accurate debtor and creditor records therefore helps you manage your hospital’s cash flow and working capital.

4. Bank Statements

Your bank statements provide an independent record of transactions passing through your hospital’s bank accounts.

If your hospital operates several bank accounts, you should maintain statements for each account.

Your bank statements can help you track:

Patient payments
SHA and insurance reimbursements
Supplier payments
Salaries
Bank charges
Transfers between accounts
Loan repayments
Other deposits and withdrawals

However, simply keeping your bank statements is not enough.

You should also regularly compare your bank statements with your accounting records through bank reconciliation.

For Example

For example, your accounting system may show a bank balance of KES 2,500,000, while your bank statement shows KES 2,360,000.
Rather than assuming that one figure is correct, you should investigate the difference.
It could be caused by bank charges, unpresented payments, direct deposits, timing differences, duplicate entries, or accounting errors.

Regular bank reconciliations help you:

Identify errors early.
Detect potential fraud.
Confirm your cash balances.
Ensure transactions have been recorded correctly.
Improve the accuracy of your financial statements.

Ideally, your hospital should reconcile its bank accounts every month rather than waiting until the end of the financial year.

To learn more about bank reconciliation, check out our simple guide on Bank Reconciliation in Kenya.

5. VAT Register

Your VAT register is another important financial record, particularly if your hospital makes supplies that are subject to VAT.

One common mistake is assuming that all hospital services are VAT exempt.

That is not necessarily the case.

Under Kenya’s Value Added Tax (VAT) Act, different goods and services receive different VAT treatments.

Some healthcare-related services and supplies may be exempt, while other goods or services may be taxable depending on their nature and the applicable provisions of the VAT Act.

This means you should not automatically treat every source of hospital income as VAT exempt.

Your VAT records should help you identify:

Taxable supplies
Exempt supplies
VAT charged
VAT incurred on eligible purchases
Relevant tax invoices
VAT return information

For Example

Your hospital may
Provide core medical services while also
Operating a pharmacy,
Providing occupational health services,
Producing medical reports, or
Supplying other goods and services.

These transactions may not all receive the same VAT treatment.

This is why maintaining a proper VAT register is important.

It allows you to distinguish between different types of supplies and apply the appropriate VAT treatment.

If you incorrectly treat a taxable supply as exempt, or an exempt supply as taxable, you may create unnecessary tax exposure, compliance issues, or additional costs.

Your accountant or tax advisor can help you review your hospital’s different revenue streams and purchases and determine the appropriate VAT treatment.

What Are the Main Financial Statements for a Hospital in Kenya?

While the five documents discussed above are important accounting records, they should not be confused with the formal financial statements themselves.

Depending on the applicable financial reporting framework and the nature of your hospital, the main financial statements for a hospital in Kenya may include:

Financial Statement	What It Shows You
Statement of Financial Position	Shows your hospital’s assets, liabilities, and equity* at a specific date.* It gives you a snapshot of what your hospital owns and owes.
Statement of Profit or Loss and Other Comprehensive Income	Shows your hospital’s income, expenses, and financial performance* during a specific reporting period.*
Statement of Changes in Equity	Shows how your hospital’s equity has changed* during the reporting period.*
Statement of Cash Flows	Shows how cash has moved into and out of your hospital, including cash from operating, investing, and financing activities.
Notes to the Financial Statements	Provide additional explanations and disclosures* that help you understand the figures presented in the financial statements.*

Your patient billing records, trial balance, debtor and creditor schedules, bank statements, and VAT records provide important supporting information used in preparing these financial statements.

What Does an External Audit of a Hospital in Kenya Cover?

If your hospital is subject to an external audit in Kenya, the auditor does more than simply look at your final financial statements.

The audit may involve reviewing and verifying different areas of your hospital’s financial records and transactions.

Depending on the nature and scope of the engagement, the audit may include:

Audit Area	What the Auditor Reviews
Verification of Premium	Where applicable, the auditor may review premium-related income and supporting records* to confirm that the amounts reported are properly supported.*
Verification of Claims	Your SHA and insurance claims* may be reviewed to determine whether the claims recorded in your accounting records are properly supported and accounted for.*
Verification of Commission	Where your hospital pays or receives commissions, the auditor may review the relevant transactions, agreements, supporting documents, and accounting treatment.
Verification of Operating Expenses	Your operating expenses may be examined to determine whether they are properly supported, recorded in the correct accounting period, and appropriately classified. This may include salaries, medical supplies, utilities, rent, repairs, and other administrative expenses.
Investments	If your hospital holds investments, the auditor may review them to confirm their existence, ownership, valuation, and appropriate accounting treatment.
Cash and Bank Balances	Your cash balances and bank accounts* may be reviewed and reconciled against supporting bank statements and other financial records.*

Why Should You Keep Proper Financial Records for Your Hospital?

Good financial records are not just about satisfying your accountant or preparing for an audit.

They help you understand what is actually happening in your hospital.

With accurate records, you can:

Know how much revenue your hospital is generating.
Track outstanding patient and insurance claims.
Monitor what you owe suppliers.
Manage your cash flow.
Identify unusual transactions.
Prepare accurate financial statements.
Comply with tax requirements.
Make better financial decisions.
Prepare for an external audit.

More importantly, good records give you confidence when making decisions about your hospital.

If you are considering opening another branch, purchasing medical equipment, hiring additional staff, or expanding your services, you need reliable financial information before making that decision.

FAQs on Key financial documents that a hospital must keep in Kenya

1. What are the 5 major financial statements that a hospital must have in Kenya?

The main financial statements generally include the Statement of Financial Position, Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flows, and Notes to the Financial Statements.
However, your hospital also needs supporting accounting records such as patient billing records, trial balances, debtor and creditor schedules, bank statements, and VAT records.

These supporting records provide the information needed to prepare and verify your financial statements.

2. What kind of accounting do hospitals in Kenya use?

Hospitals generally use accrual-based accounting, where income and expenses are recognised when they are earned or incurred rather than only when cash is received or paid.

This is particularly important for hospitals because you may provide treatment today but receive payment from SHA, an insurance company, or another third party several weeks or months later.

Your accounting system should therefore be able to track revenue, receivables, claims, expenses, payables, assets, liabilities, and cash movements accurately.

3. Are hospitals in Kenya VAT exempt?

Not all hospital-related supplies are automatically VAT exempt.

The VAT treatment depends on the specific goods or services involved and the applicable provisions of the VAT Act.

Some healthcare services and medical supplies may qualify for VAT exemption, while other goods and services may be taxable.

Your hospital should therefore review each major revenue stream and relevant purchase to determine the correct VAT treatment rather than assuming that everything is exempt.

Do You Need Accounting and Audit Support for Your Hospital?

Keeping proper financial records is an essential part of running a financially healthy hospital in Kenya.

From patient billing and insurance claims to bank reconciliations, VAT records, debtors, creditors, and financial statements, your records should give you a clear picture of your hospital’s financial position.

At Mugo & Company, we provide professional accounting services in Kenya tailored to hospitals, clinics, medical centres, diagnostic laboratories, and other healthcare providers.

We can assist you with maintaining your accounting records, preparing financial statements, managing receivables and payables, tax compliance, reconciliations, and external audit support.

If you need help improving your hospital’s financial reporting systems, Contact Mugo & Company today to learn how our accounting services can support your healthcare facility.