I am a little confused. We have a limited liability company, therefore the accounts have directors loan accounts set up as Other Current Liabilities. We recently updated our accounting software transferring the accounts to QuickBooks 2018 desktop version.
While creating the new accounts in the system, I entered the directors loan account opening balances in QuickBooks as usual, and the corresponding double entry posted in the Share Capital Account as per the example below:
Directors Loan Account = Credit 10,000
Share Capital Account = Debit 10,000
This doesn't seem right to me, can anyone tell me if this is correct please
Hello CraigD1, When setting an open balance it is a 2 sided entry so if you select directors' loan liability account then there has to be another side to the entry. For example, is this equity the director has put into the business as an opening balance prior to using Desktop 2018? The share capital account is an equity account. So if that example is correct then it would be fine for you to record it this way. We'd always recommend confirming this with an accountant as we're not trained accountants.
In this case the directors loan is made up of a number of investments made in the preceding 2 years, one of the directors loan accounts balances is positive, the other is negative. My concern is, by recording it in the Share Capital Account it alters the original paid up share capital amount. I maybe wrong (I am not an accountant either) but would it be better recorded separately to maintain the integrity of the Share Capital Accounts original entries (paid up share capital)?
Assuming this is the case, being an equity account the corresponding entry could be made in the opening balance equity?