Imagine a hospital that provides medical benefits to its employees as part of their employment package.
When an employee receives medical treatment at the hospital, the hospital covers the cost of this treatment.
To document this expense for accounting and auditing purposes, the hospital issues an invoice that reflects the cost of the medical services provided to the staff member. This invoice serves as an internal record of the benefit provided and the associated cost to the hospital.
Upon the implementation of e-Invoice, the hospital might be concerned about whether they need to change this internal billing process to comply with the new e-Invoicing requirements.
According to the response in FAQ No 1, the hospital is allowed to continue with its current billing arrangement. This means that the hospital can still issue these internal invoices for staff medical expenses paid by the hospital without needing to modify its processes to accommodate the e-Invoice system. When the hospital issues an invoice for staff medical expenses that are paid by the hospital itself, the initial accounting entry would indeed be as you described:
Dr: Other debtor – Staff
Cr: Medical Fee Charge
However, since the hospital bears the expense and the staff is not required to pay, the hospital would need to eliminate the “Other debtor – Staff” account.
This can be done by reversing the entry or by making an additional entry to reflect that the expense is being covered by the hospital as a staff benefit.
The corresponding entry to eliminate the debtor account could be:
Dr: Staff Medical Benefits Expense (or a similar expense account)
Cr: Other debtor – Staff
This entry effectively recognises the cost of the medical services provided to staff as an employee benefit expense, and it clears the balance in the “Other debtor – Staff” account, reflecting that the staff member is not obligated to repay the amount.
The hospital is allowed to follow the current billing arrangement upon the implementation of e-Invoice, which means that the internal accounting treatment for these transactions can continue as it has been done prior to e-Invoice implementation
