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Community Contributor *

What's the correct way to set up a directors loan account in quickbooks online UK? We have two directors of a Ltd company.

 
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Best answer 02-07-2019

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Established Community Backer ***

If the company is loaning money to the director, create a...

If the company is loaning money to the director, create an asset account titled something like due-from-[name]

if the director is loaning money to the company, create a liability account titled something like due-to-[name]

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Established Community Backer ***

If the company is loaning money to the director, create a...

If the company is loaning money to the director, create an asset account titled something like due-from-[name]

if the director is loaning money to the company, create a liability account titled something like due-to-[name]

Community Contributor *

This is directors loaning money to the business, we have...

This is directors loaning money to the business, we have two directors so I'll set up two accounts. I'm guessing these accounts can have positive and negative balances?
The term of the loan is unknown, possibly over 12 months, would this be Account Type; non-current liabilities. Detail Type; Share Holder Notes Payable and Name; [Director name] Directors Loan Account?
Thanks.
Established Community Backer ***

No the liability account will not have a negative balance...

No the liability account will not have a negative balance unless the company over paid the director when paying off the loan.  To pay him back, write a check and use that liability account as the expense (reason) for the check

Yes on the account set up
Super Contributor **

Certainly in the UK, it is frowned on for directors' loan...

Certainly in the UK, it is frowned on for directors' loan accounts to be an asset of the company - HMRC will naturally treat such asset balances as earnings (subject to National Insurance contributions as well as income tax).
Established Community Backer ***

Wow I was not aware of that, how strange to treat it that...

Wow I was not aware of that, how strange to treat it that way.

So in keeping with the UK requirements, how do you record loan money to the director?
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Community Contributor *

Thanks for all your help. As a Non-current liability I'm...

Thanks for all your help. As a Non-current liability I'm set up properly then?. I'm less clear on the Detail Type; 'other non current liability','provision for liability' or 'share holder note payable' which is the right one for a directors loan into the company in a UK ltd company?
Super Contributor **

@Rustler - Tips & Tutorials - that would be as a current...

@Rustler - Tips & Tutorials - that would be as a current asset. Although bearing in mind my previous comment, the book-keeper should endeavour to train all directors not to borrow money from the company, but better to use their own bank. No doubt the interest will be higher, but there will not be a tax liability attached.
Super Contributor **

@James - "Non-current Liability" should be fine. You will...

@James - "Non-current Liability" should be fine. You will need to ensure that you maintain a seperate account (sub-account) for each director, though, if only to ensure that HMRC don't get unduly excited.