Hospital Accounting and Development and Property Corporations

Two kinds of public body use their own accounting formats. A government hospital cares for the sick, trains staff and does research. It is funded partly by the government, partly by fees, and partly by grants for particular purposes, and it must show how each of these funds was used. A development and property corporation builds, sells and manages houses and land.

It must separate the cost of a project that is still under construction from the surplus on the estate it already manages, and show how much of each overhead belongs to each. The common thread is the need to account for money by purpose: a hospital by fund, a development corporation by project.

This topic covers the features of hospital accounting and the statements a hospital prepares; the sources of hospital revenue; the aims, income and expenditure of development and property corporations; and the accounts they keep, namely the general revenue account, the property and permanent works capital accounts, the capital work-in-progress account, the general development expenses account, the general income and expenditure account, the property management account and the statement of financial position, with figures.

The next topic is Interpreting public sector financial statements and ratios.

The questions in the diets reviewed that involve development and property corporations (November Diet, 2024, Question 1, and November Diet, 2025, Question 1) test the standards on investment property and on property, plant and equipment, and the plots of a development scheme, rather than these account formats; the formats are tested through the statements, so they are included here for completeness. Read parastatals and public enterprises: income, expenditure and accounting first.

Hospital accounting

Hospitals care for the sick, conduct research and train medical staff. A major purpose of hospital accounting is to help administrators manage resources efficiently and effectively. Government hospital accounting has these features:

1. a fund accounting system is operated;
2. financial activities are covered by budgeting and budgetary control procedures;
3. subsidiary and principal books of account are kept so that information can be extracted: ledger accounts, a journal and a book for recording the various revenue and expenditure classes; and
4. an autonomous government hospital must prepare financial statements to show proper stewardship of the funds disbursed and general management of resources.

The statements a hospital prepares

• Statement of financial performance: the surplus or deficit for a period, usually a year, with the previous year’s figures for comparison.
• Statement of financial position: the financial strength of the hospital at the end of the period, with comparatives.
• Cash flow statement: the sources of cash inflows and the directions of outflows; it shows the hospital’s readiness to meet short-term obligations, with the previous year’s figures.
• Notes to the accounts: modifiers or amplifiers that disclose information the final accounts do not supply, such as the accounting policy and the method of depreciation.
• Memorandum statement of account of capital fund: shows the financial information on all tangible assets and capital projects in progress at a given date. The standard practice is to transfer any part of a project completed in a year to the tangible assets account, and “capital work in progress” is determined from valuers’ certificates. The statement covers only capital projects, and funds are transferred to it to add to the balance available in the capital fund.
• Memorandum statement of account of recurrent funds: shows the financial information on all recurrent items, including unspent research grants, stocks and debtors.

Sources of hospital revenue

• Capital subvention: contributions made by government from time to time for the hospital’s capital projects.
• Recurrent subvention: contributions by government for recurrent spending, such as personnel cost and overheads covering repairs of facilities and purchase of drugs.
• Charges: fees for services rendered, including fees from the school of nursing, X-ray and laboratory.
• Miscellaneous revenue: sundry sources such as investment income, reimbursements, disposal of assets, rent on property and donations from philanthropic organisations and individuals.

Example (₦m): a hospital receives capital subvention 500, recurrent subvention 1,200, charges 600 and miscellaneous 100: total revenue 2,400, of which the recurrent subvention is 1,200 ÷ 2,400 = 50%, so half of its income depends on the government’s annual releases.

Development and property corporations

Some parastatals are set up to:

• (a) construct and sell buildings
• (b) upgrade land for sale
• (c) own property
• (d) manage facilities on a government estate
• (e) maintain industrial estates

A State property development corporation is an example.

Income and expenditure

• Income: sale and rent of houses; sale of land; miscellaneous income (dividends and interest on fixed deposits); surplus from property management; professional service income such as survey fees for private land; government grants; gifts and donations.
• Expenditure: salaries; cost of construction such as drainage and buildings; cost of land clearing; interest on loans; and compensation paid to people dispossessed of their land.

The final accounts

1. General revenue account. It consolidates the expenses of general development and estate management and the transfers to reserves. Format: revenue (surplus from general development; surplus from estate management; rent on properties; other income), less expenditure (interest on loans; expenses), gives the excess of revenue over expenditure; then loan repayment and transfer to capital reserve; leaving the unappropriated balance carried forward.
2. Property and permanent works capital accounts. They record capital projects such as land and buildings under construction and ultimately for sale, with columns for brought forward, additions and total on both the expenditure and income sides, by project (land development, drainage, schools).
3. Capital work-in-progress account. It shows projects under construction as valued by professionals.
4. General development expenses account. It records the levies made on capital works that the corporation carries out for itself or as agent of government to cover overheads. Its expenditure side has the net expenditure from the general income and expenditure account and the repayment of the general-purpose loan. The balance left is transferred to the general revenue account.
5. General income and expenditure account. It shows the surplus or deficit from development and administration, architects’ and surveyors’ services, fees, housing property sales, ground rent, improvements for sale and other sources. It has two parts: the estate management account (all relevant and incidental expenses) and the services on capital works account (services for which the general development expenses are charged). After direct charges to the relevant capital projects, general expenditure is apportioned between the general development expenses and the income and expenditure accounts, so the profitability of each project can be found. Revenue items include: net rent receivable (rents and service charges less bad and doubtful debts); housing grants from government; investment income; amounts appropriated to the grant redemption fund; the gross surplus or deficit before grants receivable and tax; the net surplus after tax and deficit grants; and transfers to or from reserves. Notes disclose items such as depreciation and taxation. A recurrent expenditure schedule splits each cost (staff, office maintenance, quarters, transport, interest on loans, preliminary survey fees) between the amount chargeable to capital works and the amount chargeable to estate management.
6. Property management account. It records rent from operations, miscellaneous income and expenses, scheme by scheme: income (rent on property, cost recovered, reduction in provision for irrecoverable rent) less expenditure (estate management expenses, rent and rates, interest on loans, repairs, insurance, legal charges, loss of rent on unoccupied flats, depreciation) gives the net rental income transferred to the general revenue account.
7. Statement of financial position. It shows the corporation’s financial strength with comparatives and discloses the items unique to the sector: movements on the grant redemption fund; deficit grants receivable; particulars of investments held; information on loans granted; and information on loans made to members of the management committee. The assets include plant and machinery, motor vehicles, buildings, treasury bills and government stocks, the property and permanent works capital account and capital work in progress, inventory, receivables and bank; the liabilities include capital reserves, general reserve, long-term liabilities, deposits for plots, trade payables and other payables.

A worked set of accounts (₦m)

Deposits for plots. A corporation sells plots for which buyers pay deposits in advance. If 80 plots are subscribed at ₦2.5m each, deposits of 80 × 2.5 = ₦200m are a liability (deposits for plots) until the plots are allocated; if the cost of developing each plot is ₦1.8m, the cost is 80 × 1.8 = ₦144m and the margin when the sale is complete is 200 − 144 = ₦56m.

The ideas in more depth

Why hospitals use fund accounting

A hospital receives money that must be used for stated purposes: a grant for research cannot pay salaries, and a capital subvention cannot buy drugs. Fund accounting keeps each pool separate, so the hospital can show that each was used as intended. The memorandum statements of the capital fund and the recurrent funds serve this purpose.

Why capital work in progress comes from valuers’ certificates

A building half finished has no invoice for its stage of completion. A professional valuer certifies how much of the work is done, and that certificate is the evidence for the amount carried in work in progress. When part of the project is complete, that part is moved into tangible assets and starts to be depreciated.

Why overheads are apportioned

A development corporation’s staff and offices serve both its building projects and its estate management. Charging all overheads to one would make the other look better than it is. The levy on capital works recovers overhead from projects; the balance stays with estate management. The apportionment lets management see the profit of each activity.

Sources and references

• The enabling Acts of hospitals and development corporations; International Public Sector Accounting Standards on property, plant and equipment and on investment property.

These points are stated as at 5 November 2026.

Worked examples

1. Calculate.
   350 − 240 = ₦110m.

1. Calculate.
   240 − 60 − 100 = ₦80m.

1. Calculate.
   80 × 2.5 = ₦200m.

How to answer in the exam

• For a hospital, name the fund accounting features and the six statements.
• For revenue, give the four sources with an example of each.
• For a development corporation, name each account and say where its balance goes.
• Show the flows: property management and general development balances pass to the general revenue account.

Common mistakes in the exam

• Treating subventions as loans.
• Writing work in progress at cost with no valuer’s certificate.
• Leaving out the memorandum statements of the capital and recurrent funds.
• Charging all overheads to estate management.
• Putting deposits for plots in revenue before allocation.
• Forgetting the transfer to capital reserve in the general revenue account.

Quick revision

• Hospital: fund accounting; statements plus capital and recurrent fund memoranda; four revenue sources.
• Development corporation: seven accounts; balances flow to the general revenue account.
• Deposits for plots are a liability until allocation.

Practice questions

These are original questions written in the style of the Institute’s exams. Try each one before you open the answer. Section A is a recall check, because the paper itself is written.

Recall check: multiple choice

Section B style: written questions

A further written question

Model answers

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