[DAYS_LEFT] days left of your Medeconomics free trial

Subscribe now

Your free trial has expired

Subscribe now to access Medeconomics

Guide to practice accounts: Analysis of income and expenditure

The various practice income and expenses categories should be itemised in the annual accounts so that you can track profits and investigate why they are rising or falling. By Simon Gray.


A breakdown of practice income is normally the first section to appear in the income and expenditure account.

NHS income
In this, an analysis of NHS income is normally shown first, typically starting with the income from the main NHS contract (GMS, PMS or APMS). The second item is usually QOF earnings. Seniority payments received are also included in this section.

Separate headings follow for income from directed, national and local enhanced services (DES, NES and LES). The various sources of income are listed within each of these enhanced service categories, such as extended hours or patient participation.

It is then usual to find a schedule of reimbursements, showing the various expense amounts reimbursed from the primary care organisation, such as notional rent, rates and waste collection.

Dispensing income
This is often shown as a single figure in the income and expenditure account, but is then further analysed in a separate note to the accounts. This will show the split of dispensing income between drugs income and dispensing income, together with the related expenses, so an overall profit from dispensing activities can be seen.

Private and professional fees
Finally, there will be another income section, including items such as income from reports and examinations, and room hire.

Adding up the subtotals for each category will give the total gross practice income figure for the year.

Practice expenses
An analysis of expenditure follows, categorised under various headings. Practice expenses will include items such as medical supplies and professional subscriptions.

As with the income section, it is typical to see a one-line figure for drugs and dispensing costs, analysed with the income in a separate note to the accounts.

The surgery premises expenses category will include rent and rates, insurance and repairs. Staff expenses will include the practice wage bill and locum fees. The administration expenses section will include legal and professional fees, and accountancy costs.

Finance expenses
The finance expenses section will include items such as bank interest and charges, and interest on any outstanding surgery loans. Finally, there will usually be an entry showing the depreciation figure on the fixed assets (equipment, fixtures and fittings) used in the practice.

The sum of these expense headings will give the figure for total practice expenditure.

Profit for the year
Deducting total practice expenditure from gross practice income gives the before-tax profit for the year.

With both income and expenditure, there should be two columns in the income and expenditure account, showing the current year and the previous year for comparison.

Partners’ drawings
Although not part of the practice income and expenditure account, partners’ drawings are nevertheless an outgoing, so it is typical to find an analysis of these in the practice accounts.

This is usually split out by partner then analysed under the various categories of drawings. Cash drawings would usually be the largest component, but other items might include payments to restore the partners’ current account (undrawn profits), balancing up their profit sharing ratios, and superannuation.

Other articles in this series:

Have you registered with us yet?

Register now to enjoy more articles
and free email bulletins.

Sign up now
Already registered?
Sign in

Would you like to post a comment?

Please Sign in or register.

Database of GP Fees

Latest Jobs