Payroll journals on Director's pay

Accounting
1

Hi

Our company has two directors who get paid monthly. We have decided to loan both salaries to the company to assist with cash flow.

By using the really useful “recording payroll knowledge base” I am happy with the journal postings required if the net salary was actually paid out from the bank account. However, we have decided to loan both salaries to the company, for the time being to assist with cash flow.

What additional journal entries would I need to complete in order to show this salary as “loaned to the company”?

Thanks

2

You can credit DCA account instead of net salary

1 Like
3

Hi

Thanks for the speedy reply:)

So am I right in thinking that instead of posting net salary to 2220 (Net wages) I merely swap that for net salary to 1201 (Directors loan account) and all the other journal entries remain the same?

4

Yes that is correct treatment

5

Thank you FaradayKeynes. Spot on advice and so fast too! Really appreciate your help:)

1 Like
6

Have you thought about NOT taking a salary that month?
Then you don’t have any tax or NI calculations and the cash just sits in the bank account.
Directors’ NI is calculated on an annual basis anyway.
No journals to worry about.
Take larger salaries later on if the company can afford it.

7

I guess it depends whether you need to be able to show “regular” income for other reasons (applying for a mortgage, etc)