I have just incorporated my business (from being a sole trader) and have a couple of questions about how to add initial entries to my directors loan account so they show in my accounts.
I have some cash from my sole trader time that I am going to use as working capital. It is currently in my bank account. To add it on quickfile, do I add it as money in or money out of the directors loan account?
Once its in can i then use the journal to show it moving to my bank account?
I have a personal loan that has been used to purchase equipment, if it has 10 monthly payments of £100 left. Can I add it to my directors loan as a £1000 loan and then show £100 paying it off each month?
Again should it me money in or money out on the directors loan account?
I’m sorry for the newbie questions, just a little confused about the directors loan account, and if it shows as money in the company or “my” money, ie is money in referring to money going from me (the person) to the company, and money out is going from the company out to me, the person?
If you have moved from a sole trader to a limited company you should create a new QuickFile account as the new company would be a different legal entity.
I have done that, so I am in the process of setting up my new quickfile account for the limited company, and that is my first experience of using the directors loan account.
If you don’t already you should set up as soon as possible a dedicated bank account in the name of the limited company, to keep money that belongs to the company separate from money that belongs to you.
At this point, when you transfer the working capital to the company’s bank account that would be a bank transfer from director’s loan to the company current account. The DL will appear overdrawn (“credit” on the balance sheet), this means that the company owes money to the director. A positive (debit) balance on the DL means the director owes money to the company.
Regarding the personal loan you probably need to check with your accountant to be sure - who owns the equipment? Presumably you originally bought it when you were a sole trader, does it still belong to you as an individual or have you sold it to the company?