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Post Info TOPIC: Loan to the business from a relative
LKH1982


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Loan to the business from a relative
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Hello,

I currently do the bookkeeping for a small company, and have a question about how to log a loan on Sage.

The father of one of the directors lent the company some money, and agreed an interest rate of 4.4%. Subsequently the business has rapaid a portion of this loan.

I am very new to this, so was wondering if someone could please explain to me the best way to account for this.

Thank you so much,

 

Laura



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MarkS


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To record the loan

Dr Bank

Cr Loans

with the value of the loan

Cr Bank

Dr Loan

with any loan capital repaid

Dr Loan Interest

Cr Loan

with any interest to be accrued (which will depend on the terms of the contract as to how the interest of 4.4% is calculated eg is it straight line over a year or on the balance at a particular date etc).

 

Regards

MarkS



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Mark Stewart CA

http://stewartaccounting.co.uk/

Providing accounting, bookkeeping, payroll and tax services to small and medium sized businesses across Central Scotland and beyond.
LKH1982


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Thank you MarkS,

Turns out it really was as simple as I thought.

Your help is much appreciated.

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Truemanbrown


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Don't forget that when interest is paid by the company to the father, income tax of 20% should be deducted. This 20% is then paid over to HMRC together with the Form CT61. The father should receive a certificate showing the tax deducted.

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Your local accountant

 

 
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