Haven't paid back DLA, thought Dividends would cover

Hello,
Relatively new to quick file here.
Small Ltd company, we often pay for expenses on personal debit card so I have been inputting those purchases through the DLA and documenting them in the expenses/purchases for quarterly VAT.
However, we previously used accountants, and they’d never mentioned about paying back the purchases. I assumed these were cancelled out through dividends. Will this affect year end accounts? Should I start labelling some dividends as DLA repayment in the future?

Many thanks
Previously we used accountants.

Hello @RebeccaA

Pease note we are not registered accountants nor bookkeepers. For queries such as this it is best to seek advice from a professional.

No problem Steve,ok.

Many thanks for responding.

Not sure i understand what you have been posting in the accounts, but dividends are paid out of profits AFTER you have paid tax on them.

If these are business expenses which you have paid personally then the company needs to reimburse you and that would be a deduction from the profits before you pay tax on them

Many thanks @ChrisA14 for your response.
Yes I’ve read now that that should be the case, we seem to have been given the wrong advice previously about dividends. Thank you for taking the time to clarify about that and re. expenses also.

The company is liable to repay you those expenses - hence there would be a credit balance on the DLA being the amount you are owed by the company. For cash flow purposes, directors don’t always take the cash out of the business immediately to repay themselves.
Dividends are declared out of post-tax profits, however again, these don’t necessarily have to be repaid in cash at the time. As this is also money owed by the company to the shareholders (and/or directors) this also increases the balance owed, it wouldn’t reduce it.
Dividends can offset amounts owed by the directors (who are usually also the shareholders in small companies) to the company if, for example, the directors have taken lumps sums out of the business account to fund personal items, or in advance of expected dividends when there is cash available. In this case, the balance on the DLA would be a debit, showing money owed to the company.

This topic was automatically closed 14 days after the last reply. New replies are no longer allowed.