[GNC] Directors loan - do I need an expense account?

[Adrien Monteleone]

With the usual caveat that this is not formal advice, I agree with 
Michael. This looks like what we call "Owner's Equity" in my parts.

If this is just for you, then my personal advice is keep it simple.

Keep it in Equity.

You can put the original 'loan' into "Owner's Equity", and any money 
taken out (or paid back) *from/by* the company can be in "Owner's Draw". 
(which should be a child of Owner's Equity so the parent results in a 
net amount at a glance.)

If the Owner returns some of the Draw, that would simply be a reversing 
type transaction in the Draw account, or an increase in their main 
Equity account. (though I suppose you could track it in a separate child 
account still if you wanted, but unnecessary as a report can handle that 
detail.)

An Accounting textbook would most probably advise that none of this 
involves expenses or revenue. (unless you start introducing 'interest 
paid' in either direction.)

Equity is already understood to be a 'liability' of a special type — to 
the owner(s). It usually is *not* recorded as normal liabilities, 
because those are usually short term (less than one year) or long term, 
but Equity is essentially on indefinite terms.

Regards,
Adrien

On 12/9/21 7:29 PM, Dr. David Kirkby wrote:
> On Thu, 9 Dec 2021 at 22:48, Michael or Penny Novack <
> stepbystepfarm at comcast.net> wrote:
> 
>> On 12/9/2021 2:04 PM, Gyle McCollam wrote:
>>
>> Repeat, get professional advice or at least learn the accounting
>> yourself. This is an accounting question, not a gnucash question.
>>
>> Michael D Novack
>>
> 
> I believe I was overthinking this - making it more complex than it needs to
> be. To  be honest, I'm using GnuCash as a bookkeeping tool, not accountancy.*
> Exactly how I record the information is not important, as long as my
> accountant can understand what I've done. *
> 
> Maybe it's best if I just set up an expense account of  "director loan"
> with the appropriate opening balance. Then at the end of the accounting
> period, he will look at the balance, and add it to the other liabilities he
> calculates. As long as my accountant can see what I've done, that's good
> enough.
> 
> I have in the past used a spreadsheet where I record
> * Expenses
> * Income
> * Bank account.
> amongst other things.
> 
> The problem I've found is that when the expenses is subtracted from the
> income, it does not agree with the change in the bank account due to
> errors. A double-entry bookkeeping system should reduce the chance of
> errors.
> 
> Dave
>