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Level 3

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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Level 15

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

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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Highlighted
Level 15

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

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]

View solution in original post

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Level 3

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

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.
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Level 15

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

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
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Level 3

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

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).
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Level 15

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

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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Level 3

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

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?
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Level 3

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

@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.
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Level 3

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

@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.
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Level 1

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

I would like to loan my company money in order for the business to use as a deposit on a property purchase.  

does anyone here know how to set up an account for me to loan the money to the company.   Clearly I must pay the money into the company bank account.  But I don’t know how to record this transaction on QuickBooks Online

 

 

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QuickBooks Team

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

Glad to see you in this thread, @FBTMark. I'm here to guide you on how you can record the loan to the company to use for purchasing a property.

 

Purchasing a property is considered as purchasing a new asset. To record the loan, you'll need to set up a liability account first. Then, create a journal entry to apply the loan to the proper asset account. Here's how: 

 

Setting up a liability account for a loan:

 

  1. Go to the Accounting tab on the left menu.
  2. Select Chart of Accounts, then click New on the right.
  3. Choose either:
  • Current Liability - To be paid in full within one year.
  • Long-term Liability - To be repaid over more than a year. 

       4. Select a Detail type in the drop-down, then select Next.

       5. Enter the name of the account.

       6. Leave the Unpaid Balance blank, then select Save.

 

Creating a Journal Entry to apply the loan to the proper asset accounts:

 

  1. Go to the Plus (+) icon at the top.
  2. Choose Journal Entry under the Other column.
  3. On the first line under the Account column, click the field and choose your new liability account in the drop-down list.
  4. Enter the amount of the loan you’re applying to the asset under the Credits column.
  5. For the second line, choose the appropriate asset account under the Account column.
  6. Enter the amount of the loan you’re applying to the asset under the Debits column.

 

I'd suggest you speak with your accountant for the proper posting of your transactions. You can also read through this help article: How do I record the loan for an asset? It helps you learn about how loans account works in QuickBooks Online. 

 

For future reference, check out this help article: Record a loan and its payment. It will guide you through creating a loan payment if it's time for your business to pay the loan. 

 

Feel free to message us again if you have follow-up questions. You can always count on us here in the Community at any time. Have a great day ahead. 

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Level 1

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

Hi Folks,

I'm (also) setting up a Director's Loan Account and given some of the comments in this thread I'd just like to double check the best way of doing this please...?

 

So:

1. Create an Account - Account Type of "Current Assets" (or should it be Non-Current Assets? - assume that wouldn't be correct).

2. Detail Type is "Loans to Officers" (my company is a small Ltd. company).

 

I could then create a Sub Account relating to the specific Director with the correct balance etc...?

 

Is that correct and any other tips?

 

Many thanks in advance.

 

 

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QuickBooks Team

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

Hi Leigh_C

 

Is the director lending the business money or is the business lending the director money?

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Level 1

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

Hey John, I will pick this up as I have the same question.

In my case, it's money I paid into the business account to pay for initial expenses before I receive money from customers. 

Thanks in advance!

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QuickBooks Team

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

Thanks for joining on this thread, @Hoil.

 

To track the transaction, create a journal entry and then reimburse it. With just a few clicks you can accomplish this task in QBO.

 

Here’s how:

 

  1. Tap the New menu in the upper left to choose Journal entry under the Other section.
  2. This action will open the Journal Entry page.
  3. From there, enter the correct date and transaction number.
  4. Go to the first line and then choose the expense account for the transaction and key in the amount in the Debits column.
  5. Next, navigate to the second line to select Partner's equity or Owner's equity.
  6. Input the same amount in the Credits column.
  7. Hit Save and Close to keep the changes.

However, if you haven’t created the expense and owner’s equity account, follow the steps below.

 

  1. Go to the Accounting menu on the left panel to choose Chart of Accounts and then press New in the upper right.
  2. This will take you to the Account window.
  3. From there, click the Account Type drop-down to choose the correct category in the Detail Type drop-down.
  4. Enter a name in the Name field.
  5. Hit Save and Close to keep the changes.
    pf1.png pf.png

For the specific category, I suggest consulting with an account to select which one to use.

 

After recording the transaction, let’s go ahead and reimburse the expense. The process may differ depending on how you want to record it (Cheque or Expense).

 

I suggest following the recommended steps in the Pay for business expenses with personal funds article and perform Step 2.


If there’s anything else I can help you with, post a comment in the Reply button. I’ll get back to assist further. Have a good one.

Highlighted
Level 1

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

Doesn't tell you HOW to set up the accounts though. Sorry, new to QB

Highlighted
QuickBooks Team

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

HI TrickyUK

 

If you would like to account for a loan from the company to a director you will need to set up an asset account; select accounting > chart of accounts > new > account type will be current assets > in the detail type select loan to others > enter a name e.g. Directors loan/Joe Bloggs loan > save and close.

When you then forward the amount to the director, we presume from your business bank account, create an expense; select the New+ icon > expense > Enter/create the director in the payee field > in the payment account select the bank account the amount is being paid from > in the date field select the date the amount was debited from your account > in the category column enter the asset account you created earlier > enter the amount of the loan in the amount column > in the amounts are field select No VAT > save and close

When the director pays you the amount back, or a proportion, create a bank deposit; select New+ > bank deposit > in the account field in the top left ensure you have selected the bank that the amount was received to and the corresponding date in the date field > in the received from column, within the 'add funds to this deposit' section, enter the name of the director > in the account column select the asset account in the amount column enter the amount that was received > in the amounts are field select No VAT.