The income and expenditure account – sometimes known as the profit and loss account – summarises the income received and expenses incurred over the year. Accounts should at minimum show the current year and the previous year for comparison. The figure at the end of the income and expenditure account shows the profit available for sharing among the GP partners.

Income
The income and expenditure account starts with all of the income of the practice, split into categories. NHS contract income is shown separately and the other categories will include outside appointments, non-NHS income and reimbursement of expenses. The categories are important as they assist later in calculating tax and in preparing the annual superannuation certificates for the partners.

Expenditure
The second half of the page lists the expenses and these are usually grouped under headings such as medical expenses, staff costs, premises costs, administration, finance and depreciation. Expenditure is allocated into general bands for ease of presentation and statistical comparison.

Notes
There is a note number against each heading on the income and expenditure account and these notes are found on the subsequent pages. For example, General Medical Services income will be found in the notes broken down into headings including the GMS contract sum, enhanced services, premises and dispensing fees.

The expenses are similarly broken down in the notes. For example, staff costs will be further split into staff salaries, employer’s National Insurance contributions, pension costs, travel and uniforms. There may be a split between administration and professional staff, for example nurses or salaried doctors.

Depreciation is not a monetary expense but a deliberate acknowledgement that equipment in the practice is reducing in value over time.

Allocation of net profit
The net figure when deducting expenses from income is the profit for the year. The distribution of net income between the partners is shown on a separate page in the accounts. Often this is split in different ways, for example rent may be split in the partners’ property owning ratios.

There is more about how the profit allocation is calculated in Part 2 of this tutorial.

The profit allocated to the partner is their income for the year and is the starting point for working out the tax and national insurance due and also the pensionable income for that partner. It is also used to compare with what they have taken out in the year from the practice.

Part 5 of this tutorial explains how employer and employee pension contributions are presented in the accounts.

Catch up with the previous parts here: One, Two and Three

Written by the Association of Independent Specialist Medical Accountants (AISMA)

Topics trending in the forum

Accessing email of partners
WhatsApp for contingency planning
What have you successfully delegated?
Patient owing money to practice