Director's loans

This explains how to record money received as a loan from a company director plus how to record repaying the loan and the interest.

To do this,

  • Create new ledger accounts to track the outstanding amount of the loan and the interest paid.

  • Record the receipt of the loan as Other Receipt.

  • Record loan repayments as an Other Payment .

Create new ledger accounts

Before you record the directors loan, we recommend you create two new ledger accounts to record the amount of the loan and interest paid using the following details.

Name

Nominal code

Category

VAT rate

Directors loan

2300

Current liability

No VAT

Director loan interest

7301

Overheads

No VAT

We recommend the Nominal code above based on our default chart of accounts. If you have a different numbering system, just use the number that suits your business.

We use the Category, rather than the Nominal code to determine where the values appear on your reports.

 

  1. From Settings, choose Business Settings,
  2. Select Chart of Accounts, then New

  3. Enter the details and Save.

Record receipt of the loan

When the loan is paid into your bank account, record the receipt of the money using the new Directors Loan .

There are a two ways you can do this.

  1. Create a new receipt from your bank feed or bank statement import each month.
  2. Manually enter as an Other Receipt. If you're using bank feeds or importing from a bank statement, simply match the with the receipt.

Using bank feeds or import your bank statement

When you process your imported bank transactions

  1. Select the new Directors Loan from the What drop down list.

  2. Select Create.

Manually create bank transactions

  1. From Banking tab, choose New, then Sale / Receipt and Other Receipt,
  2. Enter the details such as the date, amount received and a relevant reference.
  3. Enter the total amount of the loan and choose the Directors Loan . Do not record any VAT.

Record the loan repayments

When you record the loan repayments, select the new Directors Loan . This reduces the balance of the loan on your balance sheet. Record the interest payments to a separate Interest paid . The interest payments appear on your Profit and Loss Report.

There are a two ways you can do this.

  1. Create a new payment from your bank feed or bank statement import each month.
  2. Set up a recurring bank payment. If you're using bank feeds or importing from a bank statement, simply match the payment each period.

In the following example, the loan repayment is £95.83 per month, which is split into £83.33 for the loan repayment and £12.50 interest repayment.

Using bank feeds or importing your bank statement

When you process your imported bank transactions

  1. Select the split icon.

  2. On the first line,

    1. Select the new Directors Loan from the What drop down list.

    2. Enter the net amount of the repayment. In our example £83.33.

  3. On the second line

    1. Select the new Interest paid from the What drop down list.

    2. Enter the interest amount. In our example £12.50.

  4. Select Create.

Create recurring bank transactions

Use this when you don't have a bank feed and don't import your bank .

  1. From Banking tab, choose New, then Purchase / Payment and Other Payment
  2. Enter the details such as the date, total amount paid and a relevant reference.

  3. On the first line,

    1. Select the Bank Loan .

    2. Enter the net amount of the repayment. In our example £83.33.

  4. On the second line

    1. Select the Interest paid .

    2. Enter the interest amount. In our example £12.50.

  5. Select Save.

Make the repayment recurring

  1. Edit the bank payment you've just entered.

  2. Select Make Recurring, then complete the following

    1. Repeats every - Enter how often you want the transaction to repeat, then choose to repeat in a number of days, weeks or months. For example, to repeat a payment every ten days, in the first box enter 10, then from the second box choose Days.

    2. Repeat Until. Enter the date of the final payment.