So I have an opening balance for my directors Loan Account (£12k), Over the past year I have drawn down different amounts from this account as the business could afford to repay me i.e. £200 per month. What I am struggling with is as follows…
Within the directors loan account, I can create a ‘money out’ event using the ‘Input New Transaction Field’, which I can then Tag which reduces the directors loan account however it doesn’t account for the outgoing money from my working current account.
Similarly, If I create a new transaction in the working current account (Money Out) then tag it as a directors loan repayment it adds the transaction to the balance of the directors loan account rather than subtract it.
To summarise, I want to account for repayment of the directors loan both in the working current account (Money Out) & also in the directors loan account (Reducing overall Loan Balance). Please can you help? Many Thanks
A positive (debit) balance in the DL “bank account” means you owe money to the company, an “overdrawn” DL account (i.e. a credit on the balance sheet - remember bank accounts are the mirror image of what you expect) means the company owes you. So when the company repays you it’s just a transfer from the company current account to the DL - it’s money in on the DL side rather than out.
Hi Ian, Forgive me, I’m a Layman (an ironmonger actually) and thus can I please clarify… Have I made a mistake with my open balance on my directors loan account. It currently shows at +12,319.85 should it be negative?
Yes, I’m afraid you have - if you lent money to the company then the DL opening balance should have been negative. It makes sense if you think of yourself as the “bank” and the company as the account holder - the company has effectively withdrawn £12k from its account at the “bank of Andy” (and used it to buy assets or whatever), and when it repays the loan it is gradually putting money back into that account until the balance reaches zero.
When you set up the OB this would have put the balancing amount in the suspense account, so how easy it is to fix depends whether you’ve already done any journals to clear the suspense balance.
Hi Ian - Just to let you know this was great advice! Now we have changed the Directors Loan Account to a negative balance, it works seamlessly. One down a few to go! (Haa Haa) Thanks for the help on this one!
Cool, now you just have to work out what that 12k was spent on and journal it off the suspense account. For example, if it was all used to buy machinery then you’d just move the whole lot to 0020, if some of it was used to pay the first few months’ rent you might put that into 7100, etc.