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Loan from directors to pay customers invoices

Richard_Hill

Hi, sorry i need someone to help me through my brain fade.

In bank feeds I have deposit of $10,000 from one of the directors, I want that to show as a directors loan in the liabilities. (easy)

But then I want to use that money to pay off a customers invoice.

how should this be treated?

thankyou

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Richard_Hill

Hi Liz, thanks for responding. Yes, correct, however in this case I want to pay off a sales invoice. money that is owed to the business.

Liz_A

Hi @Richard_Hill

Personally, I create the directors loan account as a 2-**** account as a Credit Card and then you can use it like a normal bank account to pay a bill.

Cheers

Liz

Richard_Hill

Hi Genreve,

Thanks for your input.

The problem I have is that no money is leaving the bank.

I am just paying off our own customer’s invoice as a temporary favour.

So paying from the bank account will leave an unreconcilable entry.

Genreve_S

Hi @Richard_Hill,

Allocating that 10,000 from the director certainly needs to be correct. It's best to treat it as a director’s loan.

Set up a liability in your chart of accounts called something like Director loan – <name> (tax code N‑T). In Bank transactions, allocate the $10,000 deposit to that director's loan, so it sits in liabilities and boosts the bank balance. Then just pay the customer/supplier invoice from the business bank account as normal. When the business is ready to reimburse the director, record a Spend money/Transfer from the business bank to the director's loan account to reduce what’s owed.

Worth a quick check-in with your accountant as well to confirm it suits your setup.

Regards,
Genreve