Company loan
George
Registered Posts: 43 Regular contributor ⭐
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.
George
Is this simple or am I not seeing trouble ahead? Thanks for your help.
George
0
Comments
-
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.
Poodle0 -
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!
George0
