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Accounting for Unrecorded liabilities

Accounting for Unrecorded liabilities

My client has an unrecorded loan (from when Limited Company was a partnership) of £9,000.  Solicitor letter confirms the balance.

Original loan was £15,000 and repayments of £6,000 were made by the limited company which the previous accountant charged as dividends.

No records exist for partnership business.  The business is now VC backed and they have requested that the loan be recorded.  

I have been advised that the outstanding loan liability of £9,000 was cleared up by various  accounting entries when the partnership was disolved and the limited company was formed.  (I can only view transactions in the accounting system since the limited company was formed.

Can anyone assist with the accounting entries to fix this?  

Many thanks in advance


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By occca
05th Apr 2012 20:57


Who was the loan owed to?

Whose name is the agreement in?

Seems unlikely it is anything to do with the limited company

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By zebaa
06th Apr 2012 15:04

Bit confused

Sorry I am a bit confused by your post. Did the company take on the debt when it was formed? What sort of time period are we looking at here? How EXACTLY were the entries made in the accounts to zero this debt - what do the accounts say?

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06th Apr 2012 17:10

That's not possible

"from when Limited Company was a partnership"

the Limited Company was never a partnership.

If the "unrecorded" loan is however a liability of the limited company I suspect you will end up having to debit the Director's Loan account(s) and credit the Loan.

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11th Apr 2012 10:58


Thanks for the replies, and apologies for non-reponse (I have been away on hol).

The partnership was a husband and wife team when the company was tiny.  <£300K turnover.

The "unrecorded" loan was from one of the partners parents.  Who have since fallen out loan was not repaid hence solicitors are now involved.

2 years ago partnership was dissolved and Limited company created.

Business now VC backed and turnover is £3.2M but need to introduce this unrecorded loan.

No accounts exist from partnership, and the accounting system recording entries for the Ltd Co. only has opening balances with no backing documentation.  Accounts were previously prepared externally and all information I have been able to glean from them has been inconsistent/incorrect or plain worthless.


VC company have requested this loan be accounted for in Mar-12.


BTW - I'm inclined to agree with debiting the DLA but so far have been reluctant as this doesn't quite feel right.............


Any other thoughts would be welcome!







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