Need to know how to record a Director of a Ltd company taking over say a car from a Ltd company's books for his/her own use.
Clearing asset/depn accounts and recording gain/loss on disposal Ok.
BUT: where to charge the Director? The question I was working from has an existing Director's Loan to the ltd company so the charge was offset against that. That's fine.
But what if there is no loan account existing? Do you:
1. Create one in LT [or ST??] liabilities? This would be odd with a sitting debit balance.
or 2. Create something like "Amounts due from Director" and place either as a separate account among "capital & reserves"? debit bal. or placed among current assets?
or 3. Offset against share capital? This does not seem write as in my case it would have caused account to be a debit balance.
Any ideas anyone. Wood's accounting should deal with Director's drawings but I can't see it.
A debit balance against a capital account would be OK, I think, in a partnership scanario where no use was made of current accounts, but in a Ltd company??
The director should really pay cash for the car if he is purchasing it from the company and has no positive loan account to sustain a transfer of the asset.
If a directors loan account remains overdrawn 9 months after the financial year end that it relates to there will be a tax charge on this transaction (section 419 or it may have changed, rob mentioned another name in an earlier post.)
There may also be p11d implications to an overdrawn directors loan account over £5k (please check £5k level).
Is there scope to issue a divi against the directors loan account to offset against the purchase of the asset?
What you probably dont want to so is leave the directors loan account overdrawn for the accountants to find at the year end accounts prep process.
-- Edited by adi2402 on Wednesday 16th of June 2010 05:57:10 PM
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Forgive the typo's I generally do not proof read. Just lazy I guess!
And directors drawings and directors current account etc, all just the same thing really, they will all just end up the same place in the financial statements (i.e his loan)
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Forgive the typo's I generally do not proof read. Just lazy I guess!
adi2402 wrote:Is there scope to issue a divi against the directors loan account to offset against the purchase of the asset?
What you probably dont want to so is leave the directors loan account overdrawn for the accountants to find at the year end accounts prep process.
-- Edited by adi2402 on Wednesday 16th of June 2010 05:57:10 PM
I'm intrigued by this as I would have thought that, as bookkeepers, things like issuing dividends are well outside our remit and that putting it to a director's account to be dealt with by the accountant is the only way forward?
suppose that just more theory, but i would have thought it would be good to mention to the director that the o/d loan account may need payed back at some point by some means, rather than him being unawares, again not sure how clued up on these things the director would be.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
adi2402 wrote:..............not sure how clued up on these things the director would be.
In my (limited) experience a "professional" Director, will probably be fully aware of the pros and cons.
It's the many, small one man band operations, where the owner has been advised to form a ltd company, thought it would be a good idea to form a company, or someone in the pub told him he should form a ltd company, that often doen't realise the responsibilities that go with being a director.
adi2402 wrote:..............not sure how clued up on these things the director would be.
In my (limited) experience a "professional" Director, will probably be fully aware of the pros and cons.
It's the many, small one man band operations, where the owner has been advised to form a ltd company, thought it would be a good idea to form a company, or someone in the pub told him he should form a ltd company, that often doen't realise the responsibilities that go with being a director.
Bill
Asolutely agree Bill, they also do not and/or will not accept that they can't just take money out of the company as they did from their sole trader business (well some of them anyway).
Ruth
If they have been told by their accountant that they can take dividends. as the book-keeper you need to be aware that they cannot take them if they have not got the profit at the time to finance them.
I've actually dealt with many a director who has go themselves into a bit of a mess by overdrawing on their directors loan account without realising the negitive aspects of doing so. I would always bring to the directors attention any situation that overdraws their loan account. Which was basically the point I was trying to get at.
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Forgive the typo's I generally do not proof read. Just lazy I guess!
You're part of his finance team I think you would be within your rights to suggest possible solutions for him to consider (depending on how approachable he is etc), Divi's being just one of them.
If a bookkeeper mentioned possible divi's to me in such a position, I would be happy that he / she is considering options, adding value hopefully, this might then trigger a conversation with the accountant rather that waiting till a few months after the year end when you may have less options.
I suppose it all depends on how confident the bookkeeper is, how open the director would be to such conversations and what the bookkeeper feels their role is within the organisation.
If I was in the position of the opening poster I would post to sage, bring the overdrawn loan to directors attention, have a chat about the position and potentially options that are open to him (as their are only a few) and recommend he discuss it with the accountant. If i did that i feel I would have done my job. Everyone has a differant approach.
I cant really see why you would be so against suggesting options open to clients in various situations. Assuming it is an area you are happy discussing.
-- Edited by adi2402 on Thursday 17th of June 2010 04:51:15 PM
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Forgive the typo's I generally do not proof read. Just lazy I guess!
