I am undertaking the books for a ltd co using Sage. The Directors have all been purchasing items themselves with their own money & not through the bank account. I want to put these entries onto Sage to ensure VAT return is correct. I know which nominal code to pass the expense to ie. stationery account, but where do I put the corresponding entry? My accountant source has told me I need to set up Directors loan accounts - is this correct? Do I need to set one up for each director? I presume these need to be in the 'reserves' section of chart of accounts?
Yes, the easiest way to manage this is to run a Directors Loan Account (DLA).
This is done usually as a current liability account on the spreadsheet. (although it may at times become a debit balance and be subject to S419 tax).
I think most probably setup an account for each director but I prefer to run a single DLA for all directors and split the amounts in a schedule/working papers (I always keep on top of this stuff which I find makes everything easy). That way anyone else with access to a TB can't see the detail (just directors are provided the detail) to keep a little more confidentiality.
Use this account then also if directors ever pay personal expenses out of the company, or take various cash out not classed as dividends or salary.
