cancel
Showing results for 
Search instead for 
Did you mean: 
Announcements
Unlock the full power of QuickBooks with our Training Classes - Discover more
usermuscleworkuk
Level 1

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

 
Solved
Best answer October 25, 2021

Accepted Solutions
JoesemM
Moderator

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

Thanks for getting back to us, @usermuscleworkuk.

 

You can record the director's loan by setting up an equity account. Then record the investment. Before doing so, I'd encourage you to reach out to your accountant to ensure your financial data is accurate and select the appropriate account for your deposit.

 

Here's how:

 

  1. Click on Accounting at the left pane, then select Chart of Accounts.
  2. In the Chart of Accounts window, tap New.
  3. From the Account Type drop-down, choose Equity.
  4. From the Detail Type drop-down, choose Owner’s Equity.
  5. Fill in the other information, then hit on the Save and Close button.

 

Then, record a deposit into your equity account if the bank is not connected. If you have connected your bank account, there is no need to record the investment but categorize the transaction associated with your deposits. For more information, click this article: Record an owner's contribution or capital investment in your business.

 

Once done, you can now record loan payments. Additional details can be found in this article: Make a loan payment in QuickBooks Online. Here you'll find steps on how to record interest and bank fees payments. 

 

Also, we don't advice to mix personal and business funds, you may encounter situations that will require you to do so. To guide you further in recording such transactions, I'd recommend checking out this article: Mixing business and personal funds.

 

If you have any other questions about tracking the owner's draw or payments in QBO, let me know by adding a comment below. I'm more than happy to help. Keep safe, @usermuscleworkuk.

View solution in original post

7 REPLIES 7
Ashleigh1
QuickBooks Team

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

Hello Usermuscleworkuk, 

 

Welcome to the Community page, 

 

In order to help you with your Question we need to know if it is an actual loan account or is it where you are putting money in and out for personal use? 

usermuscleworkuk
Level 1

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

It was money that the two directors/owners put in to start the company (buy stock etc). There is no time limit on the loan and no interest.

 

Basically it’s myself and my husband who put money in from savings to start our business. We’d eventually like to get the money back but there’s no time frame on it. 

JoesemM
Moderator

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

Thanks for getting back to us, @usermuscleworkuk.

 

You can record the director's loan by setting up an equity account. Then record the investment. Before doing so, I'd encourage you to reach out to your accountant to ensure your financial data is accurate and select the appropriate account for your deposit.

 

Here's how:

 

  1. Click on Accounting at the left pane, then select Chart of Accounts.
  2. In the Chart of Accounts window, tap New.
  3. From the Account Type drop-down, choose Equity.
  4. From the Detail Type drop-down, choose Owner’s Equity.
  5. Fill in the other information, then hit on the Save and Close button.

 

Then, record a deposit into your equity account if the bank is not connected. If you have connected your bank account, there is no need to record the investment but categorize the transaction associated with your deposits. For more information, click this article: Record an owner's contribution or capital investment in your business.

 

Once done, you can now record loan payments. Additional details can be found in this article: Make a loan payment in QuickBooks Online. Here you'll find steps on how to record interest and bank fees payments. 

 

Also, we don't advice to mix personal and business funds, you may encounter situations that will require you to do so. To guide you further in recording such transactions, I'd recommend checking out this article: Mixing business and personal funds.

 

If you have any other questions about tracking the owner's draw or payments in QBO, let me know by adding a comment below. I'm more than happy to help. Keep safe, @usermuscleworkuk.

Intrepid_Learner
Level 2

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

Should they not be in the 'Director's Current Account' which is classified under the account type 'Current liabilities' ?

Intrepid_Learner
Level 2

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

May I ask why set it up as a Current Liability account type as opposed to setup as a bank account or as an equity account?

 

Others in Quickbooks have suggested to set up a Directors Loan account as an equity account. So the question is what is the difference between: Directors Current Account as a 'Bank Account' Directors Current Account as a 'Current Liabilities' account type Directors Loan Account as a 'Equity Account'

 

Thank you.

CharleneMaeF
QuickBooks Team

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

Hello, Intrepid_Learner.

 

Thank you for sharing your question about setting up a Director's account in QuickBooks Online. The choice of account type depends on the nature of the transactions and their purpose.

 

When setting up a Director's Current Account as a Bank Account allows for tracking of funds transferred between the company and the director and is suitable for scenarios where the director is depositing or withdrawing money.

 

Meanwhile, setting it up as a Current Liability is appropriate when the director owes money to the company and the account is used to track repayments.

 

On the other hand, setting up the account as an Equity Account is suitable when a director invests money into the company, and it is recorded as equity contributions.

 

However, it's important to consult an accountant to evaluate your situation and ensure your accounts are set up correctly according to accounting standards and regulations. They can provide you with expert advice tailored to your specific needs. If you don't have one, please use our Find an Accountant tool to look for an expert near you.

 

Additionally, I suggest checking out the following articles for information about owners or partners mixing business and personal funds:

 

 

You can always come back to this thread if you have follow-up queries about creating accounts and transactions in QuickBooks. We'll be here at all times to assist you promptly.

Intrepid_Learner
Level 2

Under what account/category should directors' loans be under? They are not "income" as such and therefore I don't wanted them to be taxed.

 

Hi Charlene,


Thank you for your quick response.

 

I thought a Current Liability was when the Company owes someone external like the Director money? Have I got that wrong?

 

Also if I do set up a Director's Current Account as a Bank Account, does that allow me to have Business expenses that I personally paid for to be placed here as money the Company owes me as the Director for expenses incurred? So can I input a new expense and mark it as paid against this Directors Current Account? 

Will it then not show the Directors Current Account overdrawn?

 

Would it thus be better to incur it into an Equity Account which automatically means its owed to the Owning DIrector?

 

Thank you

Heard about Advanced?

[object Object]

Enjoy continuous data backups, and bespoke reporting with QuickBooks Advanced


Need to get in touch?

Contact us