General Journal Entry for a Negative Bank Asset Account

[Bea-Him]

Hi all

I am currently trying to finalise my EOY Journals and am stuck on how to transfer a negative balance in my Cash Injected bank account to the Loans from Directors account. 

The accountant told us to set up this Cash Injected account as a way to record the money we personally spend for the business.  As there is no cash in this account it ends up with a negative balance.

I would really appreciate if someone could tell me whether I credit the Cash Injected and debit the Loans from Directors - my concern is that this will decrease the Loans from Directors account not increase it.  Does the journal have to be done as a negative or have I got this all wrong?

Look forward to your help

Bea-Him

[RienaP · Accepted solution]

Hi @Bea-Him,

Welcome to MYOB Community Forum and thanks for using this fourm to clarify your doubts. Hope this will be helpful and worthwhile.

I think the Journal entry will be the other way round where you will debit the Cash Injected account which is setup as your bank account to clear off the negative balance and your will credit the Loans from Directors to increase the amount owing to the directors account 

I have worked out below to see how it will work out but please check with your accountant as well to have a second opinion. 

Step 1: Spend money using your Cash Injected account as your accountant has mentioned. 

Note: Money will be spent from your Cash Injected account and now in your Account List you have it as negative balance. 

Write the General Journal entry as mentioned above will clear your Cash Injected account

Please see the effect of this GJ on your Chart of accounts for Cash Injected account and Directors Loan Account. 

This is purely my take on this on how to go about this however I would really recommend you to run it by your accountant before recording it in your file. 

Hope this will be helpful and please let us know how you go. If you have further queries do not hesitate to ask our MYOB Community. 

[DuncanS]

@Bea-Him  @RienaP

Beate,

I understand that the Director injected money into the business and subsequently withdrew money from the business.

The money withdraw from the business is recorded as a Current Asset Cash Injected Account which I believe should be called Cash Withdrawn by Director Account.

As you suggested, the Journal would be -

  Dr Directors Loan    Cr Cash Injected Account.

It is correct that the Directors Loan would reduce by the amount of money withdrawn by the Director.

Hope this helps.

Duncan

[Bea-Him]

Thank you Riena, this is great!!! Our accountant has not entered the journal transactions or provided them to us in previous years but I can tell from the information given to us that the adjustments they make in their records reduces the cash injected account to zero and increases the loans from directors account at the EOY. But I will run it by them just in case.
Cheers
Bea

[Bea-Him]

Hi Duncan, thank you very much for looking at this for me - the directors purchase a number of things for the business using their personal funds, so the cash injected account keeps an annual record of the amount of personal funds used - basically this is a loan from directors. On the occasion when the directors take funds from the business, this is recorded directly against drawings. I will keep your note in case things change and I need to enter the journal this way.

Cheers
Bea