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Guide to practice accounts: The income and expenditure account

This shows the practice's profit for the year and should be set out in a standard format to provide an easy-to-read summary of practice income and expenditure. By Sue Beaton.


The income and expenditure account, also known as the profit and loss account, shows the ‘bottom line’ – the practice’s profit for the year (total income less total expenditure) and is often the first figure that practice managers and GP partners look for in the accounts.

As well as reflecting the year’s financial performance, the profit figure is the starting point for tax and NHS superannuation liability calculations.

Main headings
It should categorise income under main headings such as GMS/PMS, other NHS income, reimbursements, non-NHS income and interest receivable.

Expenditure should be grouped under headings such as staff costs, medical expenses, premises, administration, finance and depreciation.

Cross references
Although it is a summary statement, each income and expenditure category should be cross-referenced to notes in the accounts.

These notes break down the headings into greater detail to enable further understanding of the results for the year. The information can also help with internal year-on-year comparison and comparison of the practice’s performance geographically and nationally. This can be extremely valuable when considering past performance and assessing potential practice performance in future. There should also be a note in the accounts showing how the total profit figure from the income and expenditure account has been divided up among the partners.

NHS/non-NHS split
This is essential for superannuation purposes, in terms of making suitable calculations for current year deductions and for the final figures to be entered on to the GP partners’ year-end superannuation certificates.

It is important to remember that income and expenditure must be reported using the accruals basis.

Simply explained, this means the practice must account for work done or supplied in the year to which it relates, not the year in which the money was received or paid.

This is a fundamental accounting principle and the basis on which HM Revenue & Customs requires profits to be reported. Failure to comply could lead to investigations or penalties, so it is essential that all income and expenditure relating to the year are accurately reported.

Money owed
Outstanding income due to the practice in respect of work done before, but not received until after, the year-end is termed ‘debtors’, while amounts owing by the practice relating to the year but paid after it, are called ‘creditors’.

Typical examples of debtors would be drugs reimbursements, QOF and some enhanced services. Typical creditors could include PAYE, superannuation payments and accountancy fees.

Estimated figures
Sometimes a cost may not be invoiced at the time of drafting the accounts, in which case, a best estimate should be included and any under- or over-provision will flush through the accounts during the course of the next financial year.

Examples might include estimated utility bills, especially in the first year or so of occupation of a new site, because providers can take a considerable time to invoice for services.

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