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........?!
Replies (10)
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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.
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.
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.
Current performance.....
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
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.
More detail needed
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.
Dividends
... the company is making £10000 a year. Its net assets should be increasing by £10000 a year. Less tax possibly.
... and dividends possibly.
If the DLA was overdrawn it could not be a reason for there being a deficiency. Only liabilities can produce a deficiency.