Purchases made from personal funds and then later reimbursed by the company

[SKO]

Hello,

I am quite new to accounting for small LTD and I got few questions at the beginning:

1. How can I add all purchases and finances before I have first earnings and even bank account? This covers payment for establishing a company (paid by private card) or some small cash spent on first purchases.

2. What exactly is „petty cash” – is it some kind of separate wallet only with cash for small spendings? And I can pay for this for coffes/magazines, right?

3. What about Initial Capital, I have found it here: http://help.quickfile.co.uk/main/default.aspx?pageid=limited_company_bookkeeping_-_the_basics but I am not sure about the idea of The Directors’ Loan Account – do you have more resources?

4. Can be Initial Capital paid in cash (to petty cash?)

thank you!
SKO

[Glenn]

@SKO

1. How can I add all purchases and finances before I have first earnings and even bank account?

Any purchases that you have made from personal expenses on behalf of a limited company need to be paid from the Directors’ Loan Account. This is a simple account to show money owed to the directors from the company or vice versa.

@SKO

2. What exactly is „petty cash” – is it some kind of separate wallet only with cash for small spendings?

It’s like a virtual bank account to track cash in the company. If you withdrew £100 from your Limited company account and put it in a safe for odds and ends this would be reflected in your accounting system as a transfer from the company account to petty cash.

@SKO

but I am not sure about the idea of The Directors’ Loan Account – do you have more resources?

There’s a brief description of the DLA here:

The Directors’ Loan Account

@SKO

4. Can be Initial Capital paid in cash (to petty cash?)

Yes it can be, to enter this on Quick File treat this as a transfer from DLA to petty cash. One day hopefully you can repay it back the other way, so in that case it’s just an opposite transfer.

Hope that helps!

[SKO]

@Glenn

SKO said:

1. How can I add all purchases and finances before I have first earnings and even bank account?

Any purchases that you have made from personal expenses on behalf of a limited company need to be paid from the Directors’ Loan Account. This is a simple account to show money owed to the directors from the company or vice versa.

OK, so at the beginning I have bought software and I have paid with my private card. Should I report it this way? (I simply put there just “software” instead of real name)

Is the payment method in this case important?

And the next question – as far as I understood DLA is some kind of “private” account connected with company. So, if I can buy something with my private cash, how can I return back money to my private wallet?

[Glenn]

Your example is spot on!

The payment method is not important, but the paid from account should be “Directors Loan”, as it is in your example. When it comes to reimbursing yourself from the company, what you can do is withdraw the cash from your limited company account or transfer directly to your personal account. In Quick File you then locate this transaction on the bank and tag it as a transfer to the Directors Loan Account. This balances out the previous debit on the DLA when you initially bought the items.