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Guide to practice accounts: What is included in a set of accounts?

Chris Howe explains what your annual accounts should contain to reflect the practice's financial performance and to be useful as a management tool.


Every GP practice should have a sound internal accounting system and a set of annual accounts.

Partners and doctors working as solo GPs need confidence that practice finances are being well managed and recorded accurately each month. GPs working in a partnership need to know that profits have been shared appropriately, and all practices need to measure their performance, both year-to-year and against their peers.

The annual accounts are also used as the basis for tax returns and computations, and for superannuation certification.

For internal purposes, there should be a system for recording all financial transactions. This may be manual book-keeping records or, more likely, computerised spreadsheets or specific accounting software.

For a GP practice, the essential transactions to record are those passing through the practice’s bank statements, together with an analysis of the large variety of income streams from the primary care organisation.

Whether further accounting transactions (debtors, creditors and accruals, depreciation and so on) are recorded internally is the choice of each practice. Many leave such details to their external accountants at year-end.

However, it is essential that a bank reconciliation (matching payments into and out of the practice to credits and debits on bank statements) is prepared for each month, otherwise significant extra work will be incurred by the external accountants, resulting in additional fees.

There are many accounting software packages available, but the most popular among GPs are IRIS GP Accounts or Sage. Accounts or Sage.  Online software is also used, from additional providers such as Xero or Quickbooks. Your accountants will assist your practice in setting up these systems.

What the accounts contain

  • Accountants’ report

This confirms that the practice accountants have prepared the accounts from the practice’s accounting records and the other information and explanations provided by the practice. The work will have been carried out in accordance with the engagement letter signed by both parties.

Note that an audit (ascertaining the validity and reliability of information provided) will not normally have been performed and the responsibility for ensuring that the practice’s accounting records are accurate and complete rests with the GP partners. While the accountants will carry out their work in accordance with appropriate accounting principles and ethical standards, they do not give an opinion on the accuracy of the accounts.

  • Partners’ certificate

All of the partners sign this. It states that the partners approve the accounts and acknowledge their responsibility for providing the accountants with all of the necessary information for the preparation of the accounts.

  • Income and expenditure account

Also known as the profit and loss account, this gives the ‘story of the year’ in terms of a summary of the practice’s major sources of income, together with a summary of expenditure under major headings. The final figure gives the profit for the year to be shared among the partners.

  • Profit allocation analysis

This analysis illustrates how the profit is distributed across the partners. A simple partnership might have profits shared equally between partners, but GP practices are never so straightforward. Calculations for seniority income, property income and mortgage interest, locum sessions and superannuation charges, among other items, all need to be taken into account when profits are allocated.

  • Balance sheet

The balance sheet is a summary of the practice’s financial position on the last day of the year. It includes the ‘partners’ funds’, illustrating how much money each of the partners has left in the practice – tied up perhaps in working capital or equity (shares) in surgery premises. The assets and liabilities of the practice at year-end are then listed, highlighting why the partners needed to leave those funds invested.

  • Schedules of income and expenses

These give a detailed breakdown of income and expenditure. A GP practice has many different sources of income, from within the NHS and outside it. The detailed income breakdown enables GPs to see that specific areas of work have been paid for and allows comparison with the previous year, highlighting unusual items. Similarly, a detailed expenditure breakdown enables GPs to query unusual entries or why, say, staff costs have changed more than expected.

  • Notes to balance sheet items

These notes to the balance sheet will show a fixed asset (long-term, tangible assets held for business use) summary. They will also give details of the partners’ capital or current accounts. The latter two terms mean roughly the same thing and are the value of each partner's financial stake in the practice on the date of the balance sheet.

  • Statistical analysis

Most specialist medical accountants, including all firms that are Association of Independent Specialist Medical Accountants (AISMA) members, carry out statistical analysis of practice performance, either in the accounts pack or as a separate document.

This will cover various performance measures for the practice (for example, profit per patient or staff costs per patient). In the case of AISMA, the practice’s statistics are compared with national statistics derived from its annual survey of GP practice income and expenses. Other specialist accountants similarly produce statistics based on their client practices’ figures.

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