how to balance a loan to a director against expenses made by him?

DaveC49 davidcousens at bigpond.com
Tue Jul 11 00:57:57 EDT 2017


Hi,

The most direct transaction to record this is:
                                                              Debit        
Credit
Liability:DirectorsBusiness Expenses           xxxx   
Asset:LoansToDirector                                               xxxx.

The most important thing is to annotate the transaction description field to
indicate that a reimbursement of the expenses incurred by the director has
been offset against the loan to the director. 

To record the loan to the director, if you had a need to record the original
value of the loan as well as repayment of the loan and the outstanding
balance you could use a header account with two child accounts as follows 

Asset:LoanToDirectorBalance
Asset:LoanToDirector:InitialLoanValue
Asset:LoanToDirector:LoanRepayments

The InitialLoanValue sub account which is debited by the amount of the loan
when the loan is first made and a second child account which is credited by
the amount of the repayments/reimbursements of expenses  incurred as in the
transaction shown above. 

If the loan had interest payments one could use a third child account to
record the interest payable on the loan (a debit split to this account would
record the interest with a corresponding credit split to an
Income:InterestonLoans account). The child accounts as described above would
all sum into the header account, which then records the current balance of
the loan.

Which you would choose really depends upon the level of detail you are
required to report to the company and external reporting requirements and
the  level of detail you need for your internal management of the loan.

David Cousens 



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David Cousens
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