Owner has a company credit card which is used for a mixture of personal expense and company expense.
Previously the personal element would go to his directors loan account, however we want to stop that (various current reasons), and so it has been decided his other company will cover his personal expense.
Scenario m
Statement comes in, journal as follows
Dr expense nominals P&L (company exp)
Cr supplier
Dr other company recharge debtors a/c (personal exp)
Cr supplier
when paid the supplier will be netted off against bank
Cash transferred from other company then journal as follows
dr bank
cr other company recharge account
any reason why we cannot do this?
Replies (5)
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No - there is no reason why another company cannot bear the cost of his personal expenses, but whether that produces a better (more tax efficient) result for him is not obvious from the information you supply. How will the other company be accounting for the personal expenditure it bears?
So long as the director doesn't think it magically make the expenses tax deductible, then no problem.
Ie they are booked against the loan account in the other company or treated as a BIK.
It might of course be neater to stop the idiot using the wrong card.
If you don’t understand the effect of any given journal entry you should pass the matter to the company’s accountant. Journal entries are a means to an end, not a subject of interest in themselves. The subject of interest here is whether the private expenses can be recharged to the other company.