Overdraft from Personal Account

Accounting
1

Hi there,

Firstly got to say I have been using the paid version of Quickfile for the last 6 months and I love it. It is generally straightforward and love the additional client portal feature and so do my customers.

I have a question I am hoping for some assistance with…Last year I used my own personal overdraft to help fund my business. Obviously I was charged monthly overdraft fees. I am unsure if I am logging it correctly and need some advice.

I have set up the personal account under bank accounts with a 0 opening balance and then tagged the OD money taken into my business account showing the personal account as overdrawn. Now I am unsure how to log the OD fees because if I do it like a loan account then the fees are going to add to the balance when they are charges. So I set the bank as a supplier and created invoices for the charges each month and logged them under bank charges.

Is this the correct method? If not what is the correct way of logging these charges?

I appreciate any help. Thanks in advance.

2

Hi @Dinky,

Thank you for your positive feedback!

Can I please first confirm if you are a sole trader or a Limited Company?

3

We are a limited company

4

Generally, any money that is borrowed from a director to the company is tagged as a transfer from the Director’s Loan Account (DLA) as a transfer to the Current Account or tagged directly to an invoice itself (depends on your situation).

I believe that any fees incurred as part of the overdraft would just be treated as part of the loan. However, I’m not an accountant, and I would recommend running this past yours just to be sure.

5

Money lent to company by director can be subject to interest charged by director which would be personal income for director though. Since personal accounts are not 100% used for business purposes generally hence not accounted for on company books as if main company bank accounts are. No need to setup personal account on company books as bank just tag money came in company bank as director loan and charge interest if you like.