Medical Practice Bookkeeping Example: Monthly View

A medical clinic can appear profitable on paper while cash is tight, payroll is overdue, and the owner has no clear record of what was paid personally versus through the practice. That is why a useful medical practice bookkeeping example must do more than list income and expenses. It should show how transactions move from the bank account into records that support payroll, sales tax decisions, corporate reporting, and informed decisions by the physician-owner.

For Canadian physicians, bookkeeping can become more complicated when a professional corporation, multiple practitioners, insured and uninsured services, staff payroll, and clinic overhead are involved. The chart of accounts and monthly process should reflect how the practice actually earns and spends money.

Medical Practice Bookkeeping Example for a Canadian Clinic

Consider a fictional incorporated family medicine clinic in Ontario. The clinic has one physician-owner, two medical office assistants, a leased office, and a mix of provincial health plan billings and privately paid services. The corporation uses a separate business bank account, business credit card, payroll account, and cloud accounting file.

For the month of April, the clinic records the following activity:

| Account category | Monthly amount | Bookkeeping treatment | |—|—:|—| | Provincial health plan billings received | $42,000 | Medical revenue, generally exempt health care services | | Uninsured forms and medical reports | $4,500 | Service revenue, reviewed for GST/HST treatment | | Medical assessments for employers | $3,000 | Service revenue, potentially taxable depending on the service | | Staff wages | $11,200 | Payroll expense | | Employer payroll costs | $1,450 | CPP, EI, and other employer payroll expense | | Office rent | $5,800 | Occupancy expense | | Medical and office supplies | $2,350 | Supplies expense | | EMR software and subscriptions | $980 | Software and technology expense | | Professional insurance and licensing | $1,175 | Professional fees and insurance | | Telephone, internet, and utilities | $760 | Office expense | | Bookkeeping and accounting fees | $900 | Professional fees | | Physician shareholder draw or dividend | $6,000 | Not an operating expense |

The clinic’s bookkeeping should not record the $6,000 paid to the physician-owner as an expense simply because money left the bank account. Its treatment depends on how it was paid. A salary is processed through payroll and includes deductions and employer obligations. A dividend is recorded through shareholder equity and requires proper corporate documentation. A personal withdrawal may be posted to the shareholder loan account until it is reviewed and resolved.

That distinction is central to clean medical practice bookkeeping. It prevents the clinic’s profit from being understated and helps avoid shareholder loan issues at year-end.

Recording Revenue Correctly

Medical practices often receive deposits that combine multiple sources of revenue. A single bank deposit may include provincial health plan payments, patient payments, third-party insurer remittances, and income from forms or assessments. Posting the entire deposit to one generic revenue account removes information the owner needs for tax planning and practice management.

A better approach is to separate revenue by source and service type. The clinic in this example could use accounts such as provincial billings, uninsured services, third-party assessments, cosmetic or elective services, and other clinic income. This allows the physician to see whether growth comes from insured clinical work, private services, or contracts.

Sales tax requires particular care. Many core health care services provided by qualifying medical practitioners are exempt from GST/HST. However, not every service offered by a clinic is automatically exempt. Certain reports, employer assessments, administrative services, cosmetic services, products, or non-medical offerings may have different tax treatment. The actual result depends on the service, the provider, and applicable tax rules.

For that reason, bookkeeping should identify taxable and exempt revenue at the time of invoicing. If the clinic is registered for GST/HST, the accounting file should track tax collected on taxable revenue separately from exempt clinical billings. It should also capture recoverable input tax credits only where the rules permit them. A clinic with both exempt and taxable activity may need a careful method for allocating taxes paid on shared expenses such as rent, software, and supplies.

Payroll Is Not Just a Monthly Expense

In the example above, staff wages of $11,200 are only one part of the clinic’s employment cost. The books also need to record payroll withholdings, employer CPP and EI obligations, vacation pay where applicable, benefits, and payroll remittances.

A practical payroll entry separates gross wages from deductions. When employees are paid, the clinic records wage expense, but it also records liabilities for income tax, CPP, and EI withheld from employees. Employer contributions are additional expenses and liabilities. When the remittance is paid to the Canada Revenue Agency, the liability is reduced.

This matters because a bank statement alone cannot show whether payroll obligations have been calculated and remitted correctly. A clinic may have enough cash to issue paychecks while still carrying an unpaid remittance balance. Monthly bookkeeping should reconcile the payroll register to the general ledger and confirm that remittances agree with payroll records.

Expenses Need Clear Boundaries

Medical practice expenses can be legitimate business costs, but they must be supported by receipts, invoices, and a business purpose. Rent, medical supplies, EMR fees, staff training, professional dues, insurance, and clinic equipment are common examples. The bookkeeping record should preserve enough detail for the expense to be understood later by the physician, accountant, or tax reviewer.

Personal expenses should not be charged to the clinic account. If they are paid accidentally, they should usually be posted to the shareholder loan account rather than office supplies, meals, or professional fees. The same discipline applies to mixed-use costs such as a mobile phone, home internet, or vehicle. The deductible portion depends on documented business use and the circumstances, not merely on which card was used.

Equipment is another area where bookkeeping often goes wrong. A new ultrasound device, major computer system, or substantial leasehold improvement may not be an immediate expense. Depending on its nature and cost, it may be recorded as a capital asset and depreciated for accounting and tax purposes. Smaller items may be expensed, but the clinic should use a consistent capitalization policy.

The Monthly Closing Process

A dependable clinic does not wait until tax season to find missing information. At the end of each month, the bookkeeper should reconcile the operating bank account, business credit card, merchant processor or patient payment platform, and payroll account. Every balance should tie to supporting documents.

The clinic should then review accounts receivable. Provincial payments may arrive after the work is performed, while private invoices for reports or assessments can remain unpaid for longer periods. Tracking these amounts helps the physician distinguish a revenue problem from a collection problem.

The closing process should also include a review of owner transactions, outstanding sales tax, payroll liabilities, prepaid insurance, equipment purchases, and unusual expenses. If a payment cannot be explained, it should not remain indefinitely in an uncategorized account. Unresolved transactions become more difficult and more expensive to correct after several months.

What the Monthly Report Reveals

After recording the April activity, the clinic can calculate operating performance before physician compensation, income taxes, and non-cash adjustments. Total revenue is $49,500. Operating expenses excluding the shareholder payment are $24,615. This produces an initial operating surplus of $24,885 before considering any additional adjustments.

That figure is not automatically taxable income, and it is not a reliable measure of cash available for distribution. The practice may still have unpaid tax installments, equipment financing, accounts payable, payroll remittances, or amounts needed for future rent and staffing. Still, a timely monthly report gives the physician a useful starting point for decisions about hiring, expansion, retained earnings, and compensation planning.

For a physician corporation, the most useful reports are usually a profit and loss statement, balance sheet, accounts receivable aging report, payroll summary, and sales tax report where applicable. A balance sheet is especially valuable because it shows bank balances, unpaid invoices, equipment loans, taxes owing, and shareholder loan balances that do not appear clearly on a profit and loss statement.

When Professional Bookkeeping Support Makes Sense

A sole practitioner with limited monthly activity may manage basic records internally if the process is disciplined and reviewed regularly. A larger clinic, a professional corporation with multiple revenue streams, or a practice with employees and taxable ancillary services usually benefits from dedicated bookkeeping support. The trade-off is cost versus time and risk: internal records may seem less expensive, but delayed reconciliations and incorrect owner transactions can create larger tax and cleanup costs later.

BOMCAS Canada supports medical professionals with bookkeeping, payroll administration, GST/HST review, corporate tax accounting, and year-end financial reporting. For clinics in Toronto, Ottawa, Calgary, Edmonton, Vancouver, Winnipeg, and other Canadian markets, the right process can be managed remotely or alongside local professional support.

The practical goal is simple: every deposit should have a source, every expense should have a purpose, every payroll balance should be reconciled, and every owner payment should be classified before it becomes a year-end problem.