I just joined a company and noticed that the director has:
Taken goods out of the business for personal use
The business was charged for these goods
The business paid for these goods
The director has permanently taken the goods for his personal affairs
The previous accountant has put all the invoices which were paid for by the business and used by the director on the directors loan account.
Please advise what the correct accounting approach should be as I was thinking that we need to invoice the director and he has to pay for the goods as a normal customer will. Or perhaps CR sales with the amount and DR the directors loan account ?
The DLA is normally the place to put these type of transactions. Depending on the agreement the director has with the business he may repay this to the company himself, or it may be cleared by a dividend from the profits of the company (assuming of course there are some).
__________________
Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
We are VAT registered so should I be accounting for the output VAT ? Also I wondered if taking the goods out from stock and not getting invoiced for it has any income tax implications ?
Just to make sure is this still the treatment if the company was invoiced and the goods belonged to the company.
Do I still CR bank and DR directors loan account without any reference to VAT ?
We are clothing business and the goods have been taken out from our stock so how will I account for the stock that has left the business and the input VAT already reclaimed by us ?
If the item was previously purchased by the business and put into stock and then later taken by the director;
Cr Stock (net amount) Cr VAT (vat amount on the amount of goods taken) Dr DLA (gross amount)
The end result of this is that the stock has decreased and the director is shown as owing the company for the VAT and the items. The VAT account reclaimable has been reduced by the amount that the business now cannot reclaim.
Depending on what system you're using some don't pick up on journals going into the VAT account so may be best to check that.
__________________
Jenny
Responses are my opinion based on the information provided. All information should be thoroughly checked before being relied on.
