Director loan Account how to use it

Question asked by Matthew Taylor 10 years ago

I Have added a director Account (bank Account) to use for expenses, Just waiting for my first invoice to be paid into the company bank so I have paid for some train tickets to see a client and paid for this out of my own pocket, I have the receipts how to I put a credit in to the Director loan account ? and then pay myself back when the company has the funds

5 Replies

Hi Matthew,

As Graeme said you can put these through as expenses in Purchases > Expenses > Create provided you have the feature toggled.

For using a Director's Loan account (DLA) , you can use this when the expense comes in as the bank account you use to the pay the bill. So one the expense has been approved and a linked bill is created, you can explain the bill using the quick pay form and selecting the bank account as the DLA:

http://www.clearbooks.co.uk/support/guides/payment/how-to-allocate-a-payment-against-an-unpaid-invoice-quick-pay-form/

This will put the DLA into a negative balance until a transfer for the outstanding amount is made from the business account to the the DLA.

Hello. I am not an accountant! I am wondering why you need a Directors Loan account to do this - it sounds complex to me. Why not simply put them through as expenses, then pay them out when you wish to? It means they are then accounted for correctly on your costs.

G

Hi Matthew,

As Graeme said you can put these through as expenses in Purchases > Expenses > Create provided you have the feature toggled.

For using a Director's Loan account (DLA) , you can use this when the expense comes in as the bank account you use to the pay the bill. So one the expense has been approved and a linked bill is created, you can explain the bill using the quick pay form and selecting the bank account as the DLA:

http://www.clearbooks.co.uk/support/guides/payment/how-to-allocate-a-payment-against-an-unpaid-invoice-quick-pay-form/

This will put the DLA into a negative balance until a transfer for the outstanding amount is made from the business account to the the DLA.

Hi - just to confirm, Berhan's advice is how I do my own expenses only I have Toggled off the expense claim (which creates a bill) and use the Ad hoc method which creates a creditor account specifically for expenses.

In general terms having a dummy bank account as a Director's loan account is a great idea as you can make sure that all the sums owed to a director appear in one place, plus you can handle all the movements in & out via the manage money or quickpay screens. So, in my books any salary, dividends or expenses I am owed all end up in the DLA.

Many of my clients will also use the company credit card or bank account to pay out for personal expenses. In the past when explaining these you would have to enter up the full transaction explain screen, (including VAT) to make sure they ended up in the Directors Loan Account balance sheet code, whereas now they are merely a transfer from one bank account to another.

Berhan's explanation is the same I gave over on UKBF - seems we're all singing off the same hymn sheet which is always nice.

As i've said, understanding the basics of how your DLA works is fairly important when it comes to running an LTD's books so getting a feel for it sooner rather than later is a good idea. It can be a little rough to begin with but once you have that light bulb moment it'll be worthwhile.

^^^ just to add to that, I don't actually use the expense claim form though, I simply enter the expense by creating a bill then quick pay it to the DLA.

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