Hello. We are paid a monthly salary by our limited company but we also submit expenses (though not nearly so much over the last few months for obvious reasons).
Previous we’ve usually bundled these amounts together in one payment out to each of us from our business account. This is now biting us on the bum as we can’t represent the different classifications - salary or expenses - in one payment. The options are either salary or Director’s Loan. As I understand it expenses - usually mileage - should be allocated to Director’s Loan.
Does anyone have a solution for this? Is it dodgy to delete the transactions from the banking feed and replace them with individual payments that each come under the correct single category? I don’t want to look like I’m cooking the books! We can ensure future payments are made per category, but we need to sort out the last three months’ payments for the last VAT quarter.
It’s not “dodgy” as long as the totals are still correct, but probably the simplest approach would be to just mark the whole money out of the current account as a transfer to Director’s Loan, then create a manual money out transaction in the DL bank account for the salary element and tag that as salary.
I’m assuming that when the expenses were incurred you logged them as normal purchases and marked them as paid from the DL account.
Thanks Ian. Much of it is mileage so there’s no transaction to record. Others include the broadband bill, which is in the name of one of the directors but is actually a business expense (I’m intending to get that changed so the company pays it directly in future). Yet more are items that were bought in a shop and paid for on a personal card and that need to be reimbursed by the company. The first two would be treated quite differently from one another I assume as the former is an intangible allowable expense, and the other a transaction that has an invoice to back it up. I haven’t logged these at all yet, nor the shop-bought items. In my defence they are only now coming to my attention! I want to make sure I record them correctly and know what to do for the future.
They are all allowable expenses and treated in exactly the same way. To recognise the expense you should ideally raise a journal which would debit the relevant expense code (e,g, travel expenses for mileage) in the P&L and credit the director’s loan account. When you pay the lump sum, you can tag it to director’s loan account also. You would then need another journal, debit net wages, credit director’s loan to clear the balance of wages included in the payment.
It’s easier to follow if you pay the two separately but not absolutely necessary.
Depending on when you actually make salary payments, you can always enter the wages journal as a credit to director’s loan also, i.e. debit salaries, credit PAYE/NIC, credit directors’ loan (instead of net wages).
