Loaning money to another business

[Maxie1]

Hello, still getting my head round the book-keeping, therefore need some advice. We have loaned company money to another business to help them out. How do i record the money going out, and when the money will be paid back. I don't know if it should be recorded under Director's Loan asset account or Director's Loan Liability account. Thank  you for any advice.

[Tracey_H · Accepted solution]

Hi @Maxie1 

Thanks for your post. As I'm not an accountant or tax advisor I'm not allowed to give you specific advice. I can tell you that assets are things owned by or owed to the company and liabilities are what the company owes. Generally speaking, if a company lends money to another party that would be an asset as the funds are owed to the company. 

To record the transfer of funds to the other party you could record a Spend Money transaction and allocate the amount to the Director Loan account. When repayments are received, record Receive Money transactions allocated to the Director Loan account.

If you're not sure about that Director Loan account or recording those transactions I do recommend checking with your accountant.

Please let me know if you need further help.

If my response has answered your enquiry please click "Accept as Solution" to assist other users find this information.

[Maxie1]

Dearest Tracey, Many thanks for your assistance. You put my mind at ease and have made it a lot clearer for me. Thank you again.