Apply funds in Due to Director account to expenses

Hello soma_and_charm,

It's a pleasure to see you in Community.  Welcome!  There may be times when a company director needs to cover business expenses with personal funds.  QuickBooks Online enables you to set up the required liability account, and record the loan and associated payments.  I would be happy to show you how!

To get started, you'll want to ensure you've created the liability account.  Depending on the repayment time frame, the Account type can be Other current liabilities (to be paid in full in one year) or Long term liabilities (to be repaid over more than one year).

Here's how to set up the account:

1. Open your Settings ⚙, then Chart of accounts

2. Select New

3. Use the ▼ dropdown menu to select either Other current liabilities or Long term liabilities for the Account type 

4. Using the Detail type dropdown list, select either Other current liabilities or Long term liabilities

5. Give the account a Name 
6. Leave the Unpaid balance field blank

7. Hit Save and close.

The liability account is created. 

A journal entry must be created to record not only what the company owes you, but also to record expenses for year-end reporting as well as tax purposes.  

Follow these steps to create a journal entry for the loan;

1. Select + New

2. Under Other, select Journal entry

3. Enter the amount of the loan and log the proper amounts to the appropriate expense accounts
Note;  The Liability/Loan account is increased, or credited, while the appropriate expense accounts are decreased, or debited.  The total of the Debit and Credit columns must be equal.

4. Select Save and close.

The loan is now recorded, and the final step is to record payments made on the loan.

The loan payment is recorded by selecting + New

2. Under Suppliers, choose Cheque

3. Using the ▼ dropdown menu for the Account, select the liability account you created for this loan

4. Enter the Amount of the payment

5. Hit Save and close.

You're all set!

If you have additional questions or concerns, I recommend speaking with an accounting professional.  If you don't have an accountant, we can help you locate a ProAdvisor in your local area. 

If you have any other questions, feel free to reach back out. We would be glad to help!