Directors Loan Account carried forward from last year - The Book-keepers Forum (UK)

Junie · Member

Directors Loan Account carried forward from last year

Shamus · Forum Moderator & Expert

Think that I'm having a senior moment as I don't understand the problem.

Last year the directors injection of cash increased bank by 9000 and the capital account will have also increased by 9000 representing the directors loan. Surely everything balances on the balance sheet?

If we're saying that this was an actual interest bearing loan by the director then creditors and bank would have been hit but it would still have balanced.

I don't see that this figure should have ever gone anywhere near the P&L? As I say though, it's a Sunday afternoon and I'm probably reading it incorrectly.

Cheers,

Shaun.

Junie · Member

It's more likely to be me, I'm afraid. I'll have another think.
Thanks for replying.

Wella · Expert

Hi Junie

Can you give a bit more detail? I like Shaun am struggling to understand the problem

Does the trial balance, balance? How much out, is the balance sheet?

My first thought is that it is a missposting but hard to tell without more info.

Bill

Junie · Member

Hi Bill,

thanks for replying.

The balance sheet for the current year (as per companies house abbreviated accounts) balances fine if I don't include the DLA amount in the creditors amounts.

However, I can see that the company has not repaid the director so I felt that this amount should be included somewhere (I've currently added a note to the co.house submission form - Transactions with Directors - to this effect)

To answer Shamus: There is no mention of the DLA amount in the P/L and there was no interest on the loan - the director simply used personal funds to keep his business afloat.

Quite obviously, I'm not an accountant nor even a bookkeeper by profession, although I've run my own company for over 10 years and prepared/submitted self-assessments for others.
I know I'm missing something really basic here. I think I'll submit as is (since it balances) and spend some time reading up to prepare for the next round of accounts!

Sorry if I'm wasting your time.

cheers
Junie

Shamus · Forum Moderator & Expert

But there have been no new transactions with directors beyond the one applied last year.

To add the £9k again would double the amount in the directors loan account so you would indeed be out by 9k.

It seems to me that you are missing the fact that the money is already included in the figures that you have and in trying to include it again you are going 9k out of balance as there is no physical change in funds so no addition to bank for this year.

Short answer is that from what you say the carried forward capital account already includes the loan as does the existing bank.

Think of it in conceptual terms. All that a directors loan account is is an increase of the amount of capital that the director has invested in the company. He has not increased his investment this year so the capital remains the same with no movement to be reported.

Hope that this helps rather than confuses matter further,

Shaun.

Wella · Expert

Hi Junie

It's never a waste of time, just hope we can help.

Trying to fathom what you have got going on.

Are you adding the DLA in again or carrying it down from the previous year?

If there is a closing balance on the account, which there will be if the directors have not been repaid, then the balance should be carried down and already included in the current liabilities section of the Balance Sheet but if you are entering the amount again you will add on another £9K.

Hope that makes sense and better still, helps

Bill

Wella · Expert

I must improve my typing skills and increase speed.

Beaten to the post by Shaun but we are basically saying the same thing.

Bill

Shamus · Forum Moderator & Expert

Hi Bill,

it's normally me trying to beat Phillip from the back office group.

Glad to get confirmation that both of us have come to the same conclusion on this one which is basically that Junie is attempting to add the directors loan again so doubling it up.

Talk soon,

Shaun.

Junie · Member

Hi,

thanks Bill & Shaun.
I think I may well be trying to do just that!

I am an engineer/software engineer by training and definitely not got "the right head" for finance.
That's why I'm permanently broke :)

however, I'm sure I'll get there - thanks again for your help

Junie

Junie · Member

Referring to the co. house abbrev accounts, would a loan to the company be classed in with the turnover for that year, or is the turnover just the total sales?

Shamus · Forum Moderator & Expert

Junie,

it's not a loan that your talking about, it's an increase in the directors capital invested in the company.

Directors capital is nothing to do with turnover which as you state turnover is just total sales.

Had this been an actual loan it would still have been reflected only in the balance sheet, not in the P&L.

cheers,

Shaun.

Shamus · Forum Moderator & Expert

Reading between the lines here, are you saying that you included the injection of capital last year as turnover? If that's the case last years accounts are incorrect.

Junie · Member

Hi,

in 07/08 year (the first year I did these accounts - up till then an accountant did them) I had a figure of approx 9000 in the creditors list for the director's loan account. Again, it was abbrev accts, and the amount did not appear anywhere else in the return. This balanced (as in the automatic checker on co house site) so I assumed all was ok.

this year (08/09 accts) I did the P/L as before which showed a loss of around 2000

sales were around 5000 and cost of sales+admin were 7000 = loss of 2000

for this year there was also an extra (private, not DL) loan to the company of 3044 which I have put in the creditors list although it does not show anywhere as an "income". I can't see anywhere on the co.hs template to add this.

Plugging these figures into the template balances if I don't include the DLA in the creds list
If I include the DLA as creds due, then I don't balance.

I need to keep the DLA showing in the system so the director can correctly be repaid when the company is in a position to do so (probably this year)

Both years showed a loss so no tax was due anyway so it does not impact on hmrc payments.

If I made a mistake last year, I'd rather not draw attention to it lest we invite an inspection - nothing untoward going on, just don't need the stress of it.

Maybe things would be clearer if I used the "full accounts" instead of abbreviated.

Unfortunately, I'm running out of time to get this in - I also have my own & my daughters self-assess to do by next Sunday (as well as working full-time, of course) nothing like leaving things till the last minute!

cheers
Junie

Shamus · Forum Moderator & Expert

As you say, time to go to the full accounts. Difficult to do without having access to the books to see where the issues arising but, here goes :

The 9k on take up sounds ok. (Its capital and shouldn't go anywhere near P&L)

2k loss sounds good. (5k - 7k).

New loan recorded in creditors, doesn't go anywhere near income. That's fine.

Variance on balance is the 9k meaning that the owners capital must be included twice.

Right, the rocks that you need to look under for this are :

1) Does the 9k appear under creditors (amounts falling due within one year). In the notes to the accounts you will find this broken down by something like tax, directors current account and accrued expenses.... You've already stated that it is here so lets take this as red.

2) Does the 9k appear in the profit & loss figure shown under reserves. This will include the amount as at the start of the year plus the negative profit for the year (As mentioned, you'll find that under reserves).

I suspect that the 9k appears in both even though it should only appear in the creditors and the reserves figure should have included only the brought forwards P&L figure. You won't see an exact 9k as the brought forward P&L figure will also include the legitimate profit for the previous year.

If as I suspect the figure is also in the brought forwards P&L figure you need to look at how it got into there and remedy removing it. Compare this brought forwards figure to the reported profit in the previous years accounts. They're supposed to be the same figure (unless there have been material post balance sheet events that affect the financial position as it should have been at year end).

If the 9k is only in one of the fields then let me through and we'll try and work through other alternatives.

Looking at the numbers that you're talking about it really shouldn't be too difficult to find a rogue 9k.

cheers,

Shaun.

Junie · Member

thanks for that Shaun, I'll have a look through my figures for this & last year. I'll let you know tomorrow night (need to stop for now - my poor old brain is hurting)

You've been very helpful (& Bill)
thanks for your time

cheers
Junie