Company loan

George Registered Posts: 43 💫 🐯 💫
I'm just wondering about the accounting treatment of this. A company currently has been reduced to no transacations, other than the sole director paying off a company loan creditor with monthly payments from the profits of another sole trader business of which he is the proprietor. He is trying to pay off the small debt of the company but doesn't want it struck off, while he is developing his now thriving sole trader business.

Is this simple or am I not seeing trouble ahead? Thanks for your help.



  • Poodle
    Poodle Registered Posts: 711
    Hi George

    If the payments are being made directly by the director then the journal entries would be

    Debit - Company loan creditor

    Credit - Directors loan account

    For each payment made.The director is in-effect lending the money to the company and becoming the creditor himself.

  • George
    George Registered Posts: 43 💫 🐯 💫
    Thanks very much, Poodle. I appreciate your reply. I don't know why, it might be a general gut feeling about some directors and how they are so laid back. I needed to be sure that it was a legitimate thing to do, and that I wasn't missing anything. I much prefer sole traders!

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