Director's Loan account - negative vs positive balance

Accounting
1

Hi, I think this counts as an accounting question but sorry if I’ve got that wrong.
I’m unclear on what a negative or a positive balance on the director’s loan account means. Is a negative balance an indication that the company owes the director, or that the director owes the company?

Context is that I transitioned from sole trader to ltd company and as part of that the company ‘bought’ my business off me in a business transfer agreement. So the purchase is money owed to me, as the director. The balance in the dir loan account is negative but should it be positive.

How do I record payments made to myself from the dir loan account? As money out, or money in?

2

Hi @stevetuk

The directors loan account (DLA) should be seen as just another bank account from the company’s perspective.

If a director paid for something on behalf of the business, there would be a money out transaction there in the same way there would be in a current account.

A positive balance would mean that the director owes the business money and a negative balance would mean the business owes them money.

I hope that helps

1 Like
3

I pay myself from my business bank account, and tag that payment as a bank transfer to the DIR loan account.