company invoices from director - Accounts Payable

[DaveC49]

Hi Marc,

Don has answered your first question fairly completely. Whether you treat
payments you have made on behalf of the company as a loan or a contribution
to equity really depends on your intention to pay back the amounts and the
timescale on which you intend to do it. 

If it ASAP (e.g. you are just waiting for the cash from a startup loan/bank
account to the company to come through), treat it as a loan to the company.
If however you expect it to be some time before you can recover the amounts,
then it would make more sense to consider the payments as a contribution to
equity.

Although you could record what the company owes you by raising an invoice
and treating yourself as a creditor of the company, it would be reasonable
practice to simply set up a Liability:LoansFromDirector account to record
the transactions as Don was suggesting and then simply recording the
repayment of funds as a payment of the loan (i.e. a debit entry to the
liability:loan acoount and a corresponding credit entry to the company's
bank account).  If instead you had recorded it as a contribution to equity
you would have a similar transaction on the relevant equity account when you
withdraw the funds.

If you do raise an invoice (Bill to the company) it is automaticlly posted
to the Accounts Payable when posted. The account for the other split would
be the Liability:LoanFromDirector account or Equity:Director'sContribution
depending on which choice you made about recording the loan.

In Australia, I know it is possible for Director's loans to a company to be
secured in much the same sense that a bank loan to the company would be
secured, but this requires specific action to take out a security at the
time the funds are advanced to the company to register it on a government
securites register.

This would provide you with security in the event of liquidation of the
company as you would be treated as a secure creditor by the liquidators.
Whether this is also the case in Scotland will depend on local legislation
so if this is an issue with funds of any significance involved, it would be
advisable to consult a local accountant. 

David Cousens.



-----
David Cousens
--
View this message in context: http://gnucash.1415818.n4.nabble.com/company-invoices-from-director-Accounts-Payable-tp4692936p4692949.html
Sent from the GnuCash - User mailing list archive at Nabble.com.