Director's Loan for Limited Company
trist
Member Posts: 3
Hi,
I'm trying to figure out the best approach for recording the lending of money to my company. When I've lent money I had been adding an income to the Checking Account and categorising it as Shareholder Loan, but this doesn't look right in the reports.
Should I add an income to the Shareholder Loan account then create an expense Checking Account and use the transfer button top link them?
0
Comments
A loan from a shareholder or a director is not revenue by nature. This means any money you lent to the company is not an income to the company, nor when the company repays the loan, the repayment of principal is an expense - let's assume the loan is interest free for now.
You need to create a Shareholder's loan account under Liabilities & Credit cards in your Chart of Accounts and place it under "Due to You and Other Business Owners" or "Other Short-Term Liability" category. If it is a long term loan with official loan certificate issued to you, I would even place it under "Other Long-Term Liability". Please note these are all balance sheet items.
When booking the shareholder's funds being deposited into the bank account, double entry is as follows:
--- Cr. Shareholder's loan account
Reverse entries when the company repays the loan.
How do I enter funds into the newly created Shareholder's loan account?