I am trying to show the relationship between cashflow and P&L and, at every step, showing what the director would be able to withdraw in the form of loans/dividends and have gone too far!
In a TB showing the following:-
FA's
15000
Stock
5000
PP's
1000
Bank
38000
Deposits Held
-35000
Accruals
-4000
Directors Loan
-20000
Would it be correct to say that opening 'available funds' are 5k? That is, the current assets less current liabilities.
In future periods, this balance added to the P&L less accruing tax, less dividends/directors loans and less any capital spend would be the current 'available funds'?
The latter is certainly a way to show what dividends are available, but stock and loans seem to complicate things and I suppose that it depends on how quickly the stock is sold and how quickly the loan is repaid. So it is clearly a timing thing.....but is it dangerous to suggest that the funds as worked out in the future period are available to the director?????
Even in the TB, the liabilities are greater than the bank balance and so timing would appear to be everything......confused!!!
From what I see the directors loan is in credit by £20k so £20k can be withdrawn without any tax consequences. From what i can see no dividends can be paid as there isnt any distributable profits from what to declare a dividend at the moment.
The net current assets are £5k assuming that the directors loan is greater than 1 year due.
Apologies for the terminlogy.....it is less about affect on tax (the director has a sizeable loan to draw against) and more about giving confidence in what CAN be taken from the business in the form of loan repayment and/or dividends without eating into the amounts that may fall due for deposits held (that may have to be repaid) or a short term loan (which may be called in at any time). The stock element has a large affect on this.
I understand that the net assets are what could be considered 'avalilable'.......but could that be said only if the stock was sold fairly quickly. A caveat perhaps that the larger the figure of the remaining (or 'old' stock) the more risk in the assumotion of what the director can spend spend spend????
