A standard set of partnership accounts comprises profit and loss account (P&L), balance sheet, current account and capital account.
Profit and loss account
This shows the year's income and expenditure. The P&L account should include rele-vant sub-headings and figures for the previous year.
Seniority pay usually has its own sub-heading. NHS contract income is another sub-heading, split further into types of contract income. If the practice is GMS, expect to see global sum, MPIG and QOF and so on.
There should also be another NHS income section listing enhanced services.
The P&L account is where to find reimbursement items, such as notional rent and GP registrar salaries. Under 'Other income', earnings categories for non-NHS work should be itemised.
The P&L expenditure section lists staff salaries, energy costs and so on. Partners' personal expenses are not included but go in the partnership tax return.
The net P&L figure (income less expenses) is the year's profit, which will be split between the partners in the 'Allocation of profit schedule'.
The profit must be adjusted before applying the profit-sharing ratios by removing amounts paid, for example, seniority pay to individual partners and fixed profit shares.
This is a snapshot of the practice's assets and liabilities at the end of the financial year. Here you should find the fixed assets, including the premises if owned by the partners, and equipment and fixtures.
'Current assets' include stock of drugs (if a dispensing practice); debtors (amounts owed to the practice) and cash in the bank. 'Liabilities' are amounts the practice owes including bank loans.
There should be a schedule analysing the partners' 'Current accounts' - the money each has invested in the business.
The amount shown as brou-ght forward is usually a positive figure for money due to partners at the previous year's end.
Added to this are the partners' profit shares. Drawings should be broken down into categories such as monthly draws, superannuation and taxation, leaving a balance to carry forward.
Partners owning the surgery will also have capital accounts showing the premises' value less any outstanding mortgage on it.
A good set of accounts clearly highlights changes in income and expenditure and, hence, in profitability. Medical specialist accountants include an appendix in which the prac-tice's financial performance is compared with other client practices in the same area.
- Simon Gray is a partner at Henton & Co LLP, specialist medical accountants www.hentons.com