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What's included within Directors Loan Account?

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Hi

I've been asked to review a set of accounts where there is a £6k Directors Loan, which is showing as repaid within the financial year.

The Director is insistent that they did not borrow any money from the business.

Are there any other transactions that could be recorded in the DLA other than funds loaned to the director? 

Replies (22)

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By Cheshire
12th Sep 2020 14:30

VoiceofBetty wrote:

Hi

I've been asked to review a set of accounts where there is a £6k Directors Loan, which is showing as repaid within the financial year.

The Director is insistent that they did not borrow any money from the business.

Are there any other transactions that could be recorded in the DLA other than funds loaned to the director? 

When you look at the breakdown of the activity on the account, what is showing as having been processed through it?

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By zebaa
12th Sep 2020 13:00

The name of the account is an indication of its intended use, but can record a debt a company has to a director, rather than what the director owes a company. Perhaps you and your client are misunderstanding each other. Could he be talking about tax consequences of such an account ? See here for further information.

https://www.gov.uk/directors-loans/you-owe-your-company-money

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By Paul Crowley
12th Sep 2020 13:04

Do the dividends make sense?
Was it the case the repayment was an dividend not taken out

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Replying to Paul Crowley:
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By VoiceofBetty
12th Sep 2020 13:13

Regular dividends have been paid on a monthly basis throughout the year.

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Replying to VoiceofBetty:
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By Sandnickel
12th Sep 2020 15:52

As others have said we are just guessing.

My first thought on this was your comment on dividends. Were they actually dividends or were they just withdrawals by the director and a final dividend has been declared (probably by the accountant) at the end of the year?

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Replying to Sandnickel:
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By Paul Crowley
13th Sep 2020 10:58

Agree
Too much taken out year 1 as not enough profit, sorted by accountant in year 2.
Based on all said so far is it the case that director does not have a clue, accountant sorted it for him and he did not understand so asked you to comment?

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Replying to Paul Crowley:
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By VoiceofBetty
13th Sep 2020 19:29

I would definitely agree now that that director does not have a clue, however they are an aquantaince of mine who had always led me to believe they did.

They had asked me some other questions about their accounts, and rather the DL was what I picked up on. They are able to provide me the full set of accounts, but not until later this week, hence I was reviewing the information available on Companies House.

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Psycho
By Wilson Philips
12th Sep 2020 13:06

If it’s shown as having been repaid within the year why are you bothered? Disclosure of a £6k loan?

If you’re that bothered, simply show him the accounting/records entries and ask him to explain.

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Replying to Wilson Philips:
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By VoiceofBetty
12th Sep 2020 13:56

Just trying to satisfy myself as to why the accounting entries would have been recorded if no such loan was taken..

I have showed them the entries and the only response I have received is that they didn't borrow any money.

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By Paul Crowley
12th Sep 2020 13:06

Context
Only one director shareholder?

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Replying to Paul Crowley:
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By VoiceofBetty
12th Sep 2020 13:11

Yes, just one.

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Replying to VoiceofBetty:
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By Paul Crowley
12th Sep 2020 13:38

Need to ask bookkeeper or accountant as clearly director does not have the awareness to understand the records and accounts

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By SXGuy
12th Sep 2020 14:51

How do you expect us to know what has gone through the DLA when we do not have access to your accounting records? It's abit like me asking you how much John sells apples for when you've never met John nor seen his prices.

There are loads of things that could potentionally go through the DLA, business expense paid hy director, director taking business money, dividend not taken yet etc etc.

If you look at what the credits and debits are that have gone through the account it will be blatantly obvious what it was, you can't just simply ask why nor can you simply accept the responce I've not borrowed any money. It means nothing. Check the entries!

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By Sarah Z
12th Sep 2020 15:21

I don't understand how you are going to review a set of accounts if you don't know how to work out what has gone through an account

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Replying to Sarah Z:
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By VoiceofBetty
12th Sep 2020 15:50

I do know how to work out what has gone through an account.

The only information currently available to me is the financial statements though, which includes an abridged balance sheet and notes (Tangiable Fixed Assets and Directors Advances, Credits and Guarantees). From this I have asked the question of the director.

Until I am in a position to obtain the supporting accounting entries I was asking a general question about the use of the DLA. My understanding was that it had to be either a simple loan to/from the director, but appreciated that it could potentially be used differently.

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Replying to VoiceofBetty:
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By Paul Crowley
13th Sep 2020 16:34

Sounds like you got these from companies house.
The director will have full accounts.

This comes over as if you are attempting to check out either a supplier or a customer

Thanks (1)
Out of my mind
By runningmate
12th Sep 2020 18:25

If the company has paid any personal expenses of the director those payments will be debited to the Director's Loan Account, but the director may not regard this as 'borrowing money from the company'.

Thanks (4)
Replying to runningmate:
ALISK
By atleastisoundknowledgable...
12th Sep 2020 22:20

runningmate wrote:

If the company has paid any personal expenses of the director those payments will be debited to the Director's Loan Account, but the director may not regard this as 'borrowing money from the company'.

This is what I vote.

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Replying to atleastisoundknowledgable...:
ALISK
By atleastisoundknowledgable...
12th Sep 2020 22:22

atleastisoundknowledgable... wrote:

This is what I vote.

Terrible grammar.

I imagine that the situation which running mate describes is that which has occurred.

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By frankfx
12th Sep 2020 19:50

A number appears on a set of accounts.... filed at Companies House?

Director asks question.
What's this loan?

A good accountant provides a schedule for Director to review and confirm accuracy before/ at the time accounts are approved.

Cherez le schedule.

Any P11D consequences,£ 10001 in year?

That too requires some supporting schedule.

Frequently the supporting schedule involves some discussion and explanation with director.

For this Director you may have to go back to basics.

But but but you will need the full transaction breakdown.

My money says Director does not understand accounts and the detail behind them.

He's in good company......

https://www.nedonboard.com/the-collapse-of-patisserie-valerie-offers-som...

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Replying to frankfx:
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By mumpin
12th Sep 2020 20:13

"Cherez le schedule"

Google translate gives:

Look for the schedule

Franks on the Ricard again.

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By Calculatorboy
12th Sep 2020 23:04

Well its simple you just need a transaction by transaction analysis of loan account for the year

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