I have been approached by a company who want me to take over their accounts. I have met with the owner who explained that it is his wife who has been doing the accounts for the past two years since he started trading and she has now realised that she hasnt got the time or the knowledge to carry on with them.
There are a few problems i have found when looking at the accounts which i can put right but the thing that i am a but stumped on is the corect way to deal with the directors loan account .At the moment it is overdrawn by £34265 but where i am getting confused is that they don't get all money from customers paid into the business account some of it goes into their personal account and they have set it up as a seperate bank account in sage which has a balance of roughly 24500 and the profit and loss account has a balance of 17050.
In my mind i think i woud need to post all of the 24500 to the directors loan account and then clear the remainder of the balance with the profit and loss account. what i cant figure out is how to correctly post the bank balance to the directors loan account as they are obviously both debit balances so would just like some advice on how to do it correctly as i dont want to muck things up any further .
Dr dla 24,500, cr 'director bank 24,500. This will leave a rather large overdrawn dla and consequently a potential s455 charge unless the overdrawn account can be paid back within 9 months of the year end. Assuming the profit figure is correct then 80% of this could be distributed by way of dividend (I'm assuming there are no further reserves that can be). Has the original dla built up over a few years, has s455 been paid? Has the wife submitted accounts or was there an accountant in place? I should ask to see the CT600 and see what's on there.
thanks for your reply.THe DLA Amount is only for the one year in previous years there has been enough profit to clear it without using the money in the separate bank account. They have not used an accountant they have done the submissions themselves with help from a friend .
