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Explaining the GP practice accounts – Part 1 of 10

by in Accounting

You are in a meeting with your GP partners and the practice accountant to review last year’s accounts. Do you:

  1. feel an impending sense of doom
  2. glaze over, or
  3. fully understand the figures and what they mean for your practice?

If the answer is A) or B), this 10-part tutorial is for you!

Making sense of the practice accounts doesn’t require a degree in economics. But you do need to grasp the basic principles of accounting and how they apply to GP practices. This tutorial will get you started and has been put together for Practice Index by the Association of Independent Specialist Medical Accountants – a network of UK firms working with over 3,000 practices across the UK and representing the very best brains in GP practice finance.

Part 1 – What are the accounts and how are they used?

Put simply, the practice annual accounts summarise the financial transactions of the practice for the year. Many practices fix their accounting year to start on 1 April, to coincide with the tax year but there is no requirement to have any fixed date.

The annual accounts include details of all the income and expenses and summarise the profit available to share between the partners.

As well as presenting the financial position of the practice and the individual partners on the last day of the accounting year, the practice accounts are used to:

  • understand the practice business – for example, where the income is coming from, how much you are spending on staff, where you need to invest to earn more and where savings can be made
  • calculate the partners’ tax liabilities and pension contributions
  • back up any applications to the bank to borrow money
  • help project and plan for the year ahead, including how much the partners can draw each month and whether additional staff can be justified
  • calculate how much is due to a retiring partner and show potential new partners what their earnings are likely to be
  • help you compare your practice’s financial performance against other practices and national averages – for example, is your practice spending more on locums than similar practices in your area?

Medical accounting is different from business accounting, not least because GP practices are usually partnerships, rather than limited companies. Here is a glossary of terms as they relate to GP accounts.


Accruals basis

The basis on which accountants and HMRC assess income and expenditure; ie when income was earned or expenses incurred rather than when received or paid.

Balance sheet

Reflects a snapshot of the assets and liabilities of the practice at the end of the year. This will include, among other things, the amounts owed to the practice for work it has carried out and amounts owed by the practice for services or goods bought in.


Money withdrawn from the practice by partners, or paid by the practice on the partners’ behalf.

Partners’ capital accounts

Represents the money invested long-term by the partners. This will include money tied up in any partnership property, less loans. Can include other assets, eg fixtures, equipment, drug stocks.

Partners’ current accounts

Represents undrawn profits not retained for long-term investment available for the partners to withdraw when funds permit.

Profit and loss account

The difference between practice income and expenditure.

Working capital

The amount partners need to have invested in the business in order to keep it running and to finance the gaps between when money is earned and when it is actually received.

In part two of this tutorial the component parts of a set of GP practice accounts are explained, find it here.

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

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[Total: 2    Average: 5/5]
Explaining the GP practice accounts – Part 3 of 10

January 30, 2020

Explaining the GP practice accounts – Part 2 of 10

January 30, 2020

3 Responses to “Explaining the GP practice accounts – Part 1 of 10”
  1. Avatar
    Michele Says:

    Marvellous…. could I just ask whether we could have the possibility of downloading these in a pdf as personally I would like to keep them?


  2. Avatar
    SJ Says:

    Parts 4-10 would be most welcome.


  3. Avatar
    Eynaya Says:

    as per Michele


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