[Question] please help - directors loan account

[SilverNodashi]

Hi all,

Due to unwanted circumstanced, I find myself in a position to redo my business books and have to capture everything since June 2015. I'm not an accountant and don't want to get one on board again at this stage.

The problem: What is the correct procedure to setup a Director's Loan account? This is a new PTY, registered in June 2015 and I put some cash into the business' bank account from my personal bank account. The company is VAT registered. I decided to use XERO since it ties in well with out E-commerce solution. Pastel / Quickbooks didn't give me all the options I wanted and since I'm not an accountant, don't have the time to try and figure this all out.

Now, in XERO, I setup a "Non-current Asset" account for the Director's Loan. 0% VAT. I have recorded quite a few payments asof July 2015, and made a withdrawal in August 2015, to my personal bank account.

1. Is this the right type of account?
2. How would I record the withdrawal from the business' account, to my personal account, against the loan account?

[EAB]

Hi,

Since the company owes you money it needs to be a liability and not an asset. Then you need to look at the terms of the loan account. If the loan is to be repaid by the company within 12 months then this will be a current liabilitu. If the terms are longer than 12 months it is non-current liability.

When you allocate the entry in the bank account you will record it against the loan account. Dt Loan account and Ct Bank.

[SilverNodashi]

Hi,

Since the company owes you money it needs to be a liability and not an asset. Then you need to look at the terms of the loan account. If the loan is to be repaid by the company within 12 months then this will be a current liabilitu. If the terms are longer than 12 months it is non-current liability.

When you allocate the entry in the bank account you will record it against the loan account. Dt Loan account and Ct Bank.

Ok, so how do I set it up if some moneys were paid in the past 12 month, and some is left to be paid? Just a non-current liability?

[EAB]

Yes, then it will be a non-current liability

[SilverNodashi]

Yes, then it will be a non-current liability

Thanx.
How would I then allocate the payment, from the business account, to my own account, in XERO? I couldn't find this topic on their help site, so perhaps if you can explain to me what function one would normally use in say Quickbooks / Pastel, then I can look for a similar feature?

Another quite question, if I pay for something cash (i.e. literally out of my wallet) on behalf of the business, how would I allocate this, in order to claim back from the business?

[EAB]

You allocate the payment the same way as any other expense in the bank account. Allocate it to the loan account, but do not use VAT.

The payments from your wallet can be done through your loan account, because the company will now owe you more