What information is included in the accounts?

The GP accounts are presented in the financial statements document prepared by your practice accountant. To help you make sense of the document, here is a run-down of what a typical set of accounts will include, based on the recommended template of the Association of Independent Specialist Medical Accountants.

Partners’ approval of the financial statements

All the GP partners in the practice are responsible for reading and understanding the accounts. Each partner should be required to sign their approval of the financial statements to confirm that they are in agreement with them. Larger practices may delegate this to an executive board.

Accountants’ report on the unaudited financial statements

This is a short report prepared by the practice accountant to confirm that they have prepared the accounts based on the information provided by the practice and in accordance with the engagement letter signed by both the practice and the accountant. It also confirms that the accounts have been compiled on the appropriate accounting basis. Note that in most cases practice accounts are prepared without the need for a formal audit. It is not the accountant’s role to fully check all transactions.

Balance sheet

The balance sheet illustrates the financial position of the practice at the end of the accounting year. It will include the amounts owed to the practice for work undertaken and also the amounts owed by the practice for services or goods bought in.

The balance sheet includes the partners’ funds, including how much money they hold in the practice to cover day-to-day running costs (shown as the partner’s current account and any equity that they hold in the surgery premises (shown as the partners’ capital accounts).

Distribution of net income or profit allocation

The distribution of net income shows how the profit has been shared amongst the partners.

The profit is calculated per partner in two different ways. The first, or ‘top slice’, is the profit from income earned by individual partners. The remainder is the pool of profit which is allocated according to the profit-share ratios set out in the partnership agreement. Calculations take into account any income from the surgery premises, mortgage interest, seniority, locum costs and employer’s superannuation charges, amongst other things.

Practice income and expenditure account

This is a schedule of income earned and expenses incurred during the year. Income will include both NHS and non-NHS income. Expenses will include staff costs, medical expenses, premises and administration costs.

Notes to the financial statements

This is where more detailed breakdowns of income and expenses are provided, together with major items from the balance sheet such as fixed assets including premises, computer equipment, fixtures and fittings. The notes also include breakdowns for the individual partners’ capital and current accounts.

In part three of this tutorial there is an explanation of the partner current accounts and how they work. If you have missed part one, find it here.

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