Directors Loan Account

Q. How do i set up a Directors Loan Account on SortMyBooks Online?

Directors  loan  Account Director  Loan  Accounts  are  only  for  Limited  Companies  and  should  not  be  used  for  Sole  Traders.  For   Sole  Traders  go  to  this  article  on  Drawings  here.  

To  set  up  a  Director  Loan  Account  click  on  Accounts  and  Bank  and  Add For  Name  you  can  type  in  the  Director’s  Name  plus  Director  or  DL  to  signify  it  is  a  Director  Loan   Account.   In  Type  make  sure  to  select  ‘Loan’  so  that  the  Loan  will  show  in  the  Long  Term  Liabilities  section  of   the Balance  Sheet.

Opening  Balance  –  this  should  be  the  balance  owed  to  this  Director  at  the  beginning  of  the  First   Accounting  Year  you  are  entering  in  to  SortMyBooks.  You  should  enter  this  as  a  negative  amount.   Note:  if  you  don’t  know  the  Opening  Balance  for  the  loan  then  you  can  come  back  and  enter  it  at  a   different  time  you  can  still  set  up  the  Loan  now  and  go  ahead  and  enter  in  transactions.

A  common  question  asked  is  why  you  would  set  up  a  Director  Loan  Account  as  if  it  is  a  Bank  Account.   The  reason  we  recommend  this  is  so  that  you  can  record  Purchase  Invoices  or  Expenses  paid  out  by   the  Director.    For  full  instructions  on  How  to  Record  Director’s  Expenses  including  Mileage  and   Subsistence  click  here.

Reimbursing  the  Director  for  money  that  the  company  owes  to  him/her  should  be  done  through  an   Account  Transfer If a  Director is putting their own money into the business by way of a loan as opposed  to  an   investment  in  Share  Capital  that  should  be  recorded  as  an  Account  Transfer  also.   To  transfer  money  from  a  Directors  loan  account  to  your  business  account  go  to  Accounts  and  Bank. Select  your  Directors  Loan  account   Click  on  the  Transfer  button In  the  Amount  box  put  in  the  Amount  of  money  you  are  transferring  to  your  business  account In  the  Account  box  click  on  the  dropdown  menu  and  select  your  business  account Select  the  date  and  the  type  of  payment  and  then  click  ok.

NB: Year End for Director's Loan: While your company can owe you money, you cannot owe your company money. You need to check your Director Loan account BEFORE you get to the end of your accounting year and repay the company any money that you owe. Otherwise this will be added to your salary and income tax will be due on it.

• Directors loan account.pdf