Loan Dilemma

ybolg

Hi

I am doing accounts for a friend which are a bit of a mess here goes.

It is a small Ltd company - she has taken out a personal loan and put this into the comapny bank account.
She has also taken out another personal loan for her associate who was set up as a company secretary but not paid a wage so not set up as an employee. She put the money from this loan into the company bank account then withdrew and gave to Co. Secretary.

However the loans are being paid back out of the company bank account but the Co.Secretary is paying money into the company bank account to cover her loan.

As anyone got any ideas how I should record this in sage.

Any help would be appreciated

Thanks

[Deleted User]

Director

I am assuming that she has taken out a personal loan to boost cash in the business and when you say personal loan you mean that she is liable for it and not the business, therefore the business owes her the money back?

Capital should be input as Dr Bank, Cr Director's loan account.
Repayments should be input as Cr Bank, Dr Director's loan account.

Associate

I am assuming that she has taken out a personal loan for her friend and that her friend owes her the money back but it has gone through the business bank account?

Capital should be input as Dr Bank, Cr General loans account.
Withdrawal should be input as Cr Bank, Dr General loans account

Repayments should be Cr Bank, Dr General loans account
Associate paying into the bank should be Dr Bank, Cr General loans account.

This answer is based on assumptions as you didn't give too much of a description in your post.

Hope this helps.

ybolg

Don Juan

Thanks for the reply it was very helpful, my only concern iss with the Associate loan this person was the company secretary but no longer, so really has nothing to do with the business now.
There is no guarantee that my friend will get her money back but she is hoping she will.

My only concern with the entries you suggested for the Associate loan is if I Dr General loan account will this then put an expense in the P and L for this amount and if the associate then does not pay the money back this will come out as an expense to the business which it isn't really anything to do with the business. Really it shouldn't really be in there.

Do you have any suggestions, please. Or am I just complicating things

Thanks

Ybolg

Anne Boleyn

Loans

Hi

Did the associate as company secretary actually do anything? Did she invoice the company for work done on behalf of the company?

The second loan as the first was in the directors name and the money placed in the company bank account. So Dr Bank Cr DLA then Dr Fees paid Cr Bank for the amount paid over to the company secretary assuming actual work was carried out and invoiced for.

Why would the company pay back the directors loans? Surely a benefit then arises.

Monsoon

Loan interest on a personal loan taken out for the business of a close company (i can't remember the exact parameters) are allowable expenses against an individuals income against tax.

So the loan in to the company is Cr directors loan, and the repayments are dr directors loan. The company can pay interest to the director on the loan (and would have to deduct tax at source like a bank would) and the director would be taxed on this income - but has the personal interest expense to offset as above. Paying the director interest would mean the dr and Cr would be equal with no overdrawn DLA issues, and the company can offset the interest against tax. Long winded way of making the interest a business expense but it works.

I can't get my head round the Co Sec loan tonight but if i work it out i will come back!

ybolg

Thanks Monsoon

Yor reply was very helpful, if you can think of any way to treat the Co sec loan that would be great.

Thanks again

Monsoon

I've just comeback to this and i think it is the same.

The company has made a loan to the co sec, or, if the co sec does do some work, perhaps they should be given a wage of some kind dependent on the specifics of the arrangement and her circumstances which would make a tax deductible expense in the company.

Again, if the director charges interest as my answer above, that should work. If the co sec pays back the loan, then the loan gets repaid.

May need to look at the beneficial loan rules as well.