Hi Mark

When I started the company I put in some of my own money to facilitate cash flow and this shows as positive balance on directors loan account.
I am now in a position to repay the money but am not sure how to record it.
If I post a general transaction from cheque account to directors loan account there is no change in the P&L, is this right? Should I be creating an expense account to allocate the payments to?
I think I'm being dumb here but just can't quite see why!!

Simon

Hi Simon,

If the Directors Loan account is an Asset then the balance should be negative - this indicates that the company owe's the director money (not the other way around).

You are correct about the general transaction from the Cheque Account to the Directors Loan Account, and that it has no affect on the Profit and Loss report.

You should not create an expense account for the repayment of the loan. From an accounting perspective it is the same as when the company pays back a bank loan - the original loan didn't count as income so the repayment of the loan shouldn't count as an expense.

Regards,

Hi Mark,

Thanks for the reply.
My DLA is under liabilities hence the positive value.

" the original loan didn't count as income so the repayment of the loan shouldn't count as an expense"
This was what I suspected but wasn't sure about

thanks
Simon