Negative balance sheet making figures look bad...

Negative balance sheet making figures look bad...

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Hi
Limited company overdrawn balance sheet due to long term directors loan (30k)...the company has very little assets.
Company makes a profit around 10k . How to make figures look better........?!

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By Peter Kilvington
19th Nov 2014 13:42

He could

The real answer is that the company needs to make more money, why not put you effort into this instead of making the figures looks better.

For this years accounts it is a bit late but for the current accounting period you could consider capitalising the loan.  Make sure you explain the advantages and disadvantages of this. 

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By Stuart.thomson
19th Nov 2014 14:07

Have to agree with the above -focus on improving the business. That said leverage of 3X profits is, depending on the industry, probably not excessive.

From a purely presentational perspective you could look at the direction's loan and decide if it behaves like equity - being so thinly capitalised i suspect it does - in which case you could reclassify this under shareholder funds.

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By johngroganjga
19th Nov 2014 15:10

I don't think you can just call it equity, without actually capitalising it of course.

But you can strike the balance sheet totals in a different place.

The Companies Act specifies the sequence in which figures must be shown but not where the totals shall be struck.  So, to put it simply, you can have assets in the top half and liabilities and equity in the bottom half. 

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RLI
By lionofludesch
19th Nov 2014 15:21

Directors

If the company's making £10000 a year, how has the negative equity arisen ?

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Replying to Tim Vane:
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By cathhammond
19th Nov 2014 23:08

Loan to company on incorporation from director/shareholder

Thanks for comments....quick look on current year sage and deficit is reducing.
Just preparing for client meeting and all eventualities client may throw at me...

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Replying to Tim Vane:
paddle steamer
By DJKL
20th Nov 2014 10:07

Current performance.....

lionofludesch wrote:

If the company's making £10000 a year, how has the negative equity arisen ?

 

Current performance is no guarantee of past performance.

Now there is a turnaround

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By Stuart.thomson
19th Nov 2014 17:00

Although unclear in the OP i think the loan may be from the company in which case i dont think it can be put under shareholder funds. I initially read it as a loan to the company by a direct shareholder.

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Replying to klerg000:
RLI
By lionofludesch
19th Nov 2014 18:58

More detail needed

Stuart.thomson wrote:
Although unclear in the OP i think the loan may be from the company in which case i dont think it can be put under shareholder funds. I initially read it as a loan to the company by a direct shareholder.

So did I - but the company is making £10000 a year.  Its net assets should be increasing by £10000 a year.  Less tax possibly.

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Replying to SXGuy:
By johngroganjga
20th Nov 2014 08:51

Dividends

lionofludesch wrote:

... the company is making £10000 a year.  Its net assets should be increasing by £10000 a year.  Less tax possibly.

... and dividends possibly.

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By johngroganjga
19th Nov 2014 23:07

If the DLA was overdrawn it could not be a reason for there being a deficiency. Only liabilities can produce a deficiency.

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