Dealing with directors expenses in LTD

Grit

Hi

I've only really dealt with sole traders before where I could put things like sweets and magazines etc straight to drawings when they are private, but where do I put them on a limited company, what account do I need to set up, what is directors renumeration considered to be

Thanks

peugeot

Private items need to be put into a directors loan account, which is similar to drawings but any amounts put into this account must be repaid back to the company by way of monetary reimbursement or dividend. The directors must also ensure that sufficient profits are generated to enable a dividend to be declared.

Directors' remuneration is the statutory term for directors' salary.

Limited company financial statements are more complicated than sole traders due to the Companies Act requirements and the formats the profit and loss account and balance sheet have to be in, together with the relevant disclosure requirements, which you will need to be familiar with during the course of preparing them.

Regards
Steve

Poodle

peugeot wrote: »

Directors' remuneration is the statutory term for directors' salary.

I always wondered about that as software packages show both of these items, thanks Steve

Poodle

claudialowe

I always thought that "salary" was the, say, £500pcm and remuneration then included ers NICs, benefits in kind etc etc.

Claudia

peugeot

Directors remuneration can include salary & benefits (they are also referred to as directors emoluments).

Claudia if you have a Ltd Co client that pays directors remuneration, that is also disclosed in the notes to the accounts (which it must always be), then you should not include employers' national insurance within the total remuneration. Employers' NIC should always be treated as a separate cost, but not included in the directors salary/benefits. This is because the director derives no benefit from it, ers NIC is a cost to the company alone.

Best regards
Steve

Grit

Okay, a directors loan account has already been set up in short term liabilities, and an entry made to show the director loaning the company some petty cash, is this the correct way of showing it? I guess they are saying the company owes the director this money. Do you then put private expenses into this account too so that the net is what is owed at the year end, if that makes sense.

The company is definitely going to make a substantial loss this year so I am not sure how that affects things in light of your earlier post.

I don't know if its jut me but I feel although we skirted the issues in the AAT qualification, there is such a lot of crucial stuff we just never learnt, I'm thinking here of the basics like calculating loan tables and where to put things etc, I suppose those people lucky enough to have managed to get work in practice first would not feel so adrift!

deanshepherd

Grit wrote: »

I don't know if its jut me but I feel although we skirted the issues in the AAT qualification, there is such a lot of crucial stuff we just never learnt, I'm thinking here of the basics like calculating loan tables and where to put things etc, I suppose those people lucky enough to have managed to get work in practice first would not feel so adrift!

That's why passing the exams is only one aspect of becoming a member.

Poodle

deanshepherd wrote: »

That's why passing the exams is only one aspect of becoming a member.

Here, here

peugeot

Ltd company financial statements can be quite complicated if you've not had experience of preparing them before. It is becoming increasingly common for Companies House to reject financial statements which are not prepared in the required format under the Companies Acts.

It isn't really possible for a contributor to go into the required detail on here on preparing them. I could only advise you to attend a CPD course but even those assume a certain degree of knowledge. It may be worthwhile considering bringing the accounts to trial balance and then sub-contracting the preparation of the statutory financial statements to another firm until you feel more confident.

Going back to your original question the petty cash is entry is corrrect, but the director needs to be careful not to incur too many private expenses, unless he personally repays them. If he doesn't and the company doesn't make sufficient profits to repay the drawings, then there could well be tax implications.

Kind regards
Steve