Repayment of Directors Loan

Hi there

Apologies, my questions always seem to be about the Directors Loan Account (for my Limited Company), which I find very confusing!!

An earlier question I asked related to repayment of annual mileage allowance, and I’m very happy with the answer I was given of using a dummy invoice, but I’m not sure if that applies to a basic repayment of the DLA (which is money owed from initial capital and expenses that have accrued). I have tried the following (the cash is currently in the savings account, so first step shows it being moved to current account):

Savings account > Money Out (tagged to Current account)
Current account > Money Out (tagged to Directors Loan account)
Directors Loan account > Money Out (tagged to ??)

I don’t know how how to tag this transaction as the cash is being transferred to a personal account. I’ve tried transfer between accounts, but my personal account isn’t listed, and when I tag to DLA the balance in that account is then wrong?

Am I on the right track but not tagging correctly, or is there an easier way such as using a dummy invoice?

Thanks in advance for any help with this?

CAL

Hi @CAL

With a Director’s Loan Account (DLA), the aim is to get the balance to zero, so the director owes nothing to the business and vise-versa.

In the case of a limited company, think of the DLA as your personal bank account. Regardless of how you personally invested money, it should be treated as a loan from the director.

So, if you have loaned, let’s say £1000 to the business in the form of a director’s loan, when the business pays this back, you can just tag it to from the current account to the DLA to bring the balance back down to £0.00.

There’s some reading material in our knowledge base in regards to the DLA, that may be of some help.

Hope that makes sense?

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