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Post Info TOPIC: Double Entry for Directors Loans
HumanShale


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Double Entry for Directors Loans
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OK, so the directors of a company have taken out a loan themselves that is used only for business purposes as they were unable to raise the money any other way. They put the money in the bank account.

I have recorded this as:

Dr Bank

Cr Directors Current Account

 

The repayments I am recording as (obviously the one credit = the sum of the two debits):

Cr Bank

Dr Directors Current Account

Dr Loan Interest

 

I would like to be able to separate the loan from the other transactions in the directors current account. Do I need a separate directors loan account or can I put the loan as a business liability even though it is in the name of the director not the company? What Sage nominal codes should I use?

What is the best solution here?

Thanks for your help.

 

 

 

 

 

 

 

 



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Amanda


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If it's a business loan and is wholly for business, I would tend to set up a separate code in the nominal ledger to record it.

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Amanda
HumanShale


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Even though it's not technically a liability of the business as the loan is in the directors name?

 

Is that allowed?



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Mad Liz


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A limited company is a separate legal entity and as such, legally, is responsible for its own actions. The finances of private limited companies are entirely separate from those of its owner(s).

Thus the director can loan the company money. It would be wise to separate this "investment" money from the day to day in and outs of the Director's Current Account.

Sage code - I would suggest using 2300.



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Liz Needham FFA FIAB FFTA

Needham Accountancy Ltd
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