Skip to main content
Marufa0013
Marufa0013
October 15, 2021
Question

Year end adjusting entries (net salaries and wages payable with director's loan account)

  • October 15, 2021
  • 1 reply
  • 0 views

Hello

In QBO, the direcor loan is categorized under current liability. So, when I am adjusting net salaries and wages payable with the direcor loan account I think the loan account should be debited. In the adjusting journal entry, the net salaries and wages payable is in debit side and Director's loan is in credit side. This is supposed to increase the director loan liability account, but, in the account history I am seeing the balance decreased  after the adjusting entry recorded even if it's showing as an increase in the liability account. Why is it so? If it's wrong, what should be the correct form?

1 reply

RoscoPC
RoscoPC
October 22, 2021

Hi,

 

it's difficult to understand why you are making the entry

 

The director's loan account is negative and it's a liability account. SO that means that the company has a negative liability? I.E. the director OWES the company Money In effect the negative balance is an asset. 

 

Is the entry being made because money is owed to the director? Or is the entry because the director owes the £k. Why is the entry necessary, shouldn't this have been posted each month / week? 

 

So if the director is owed the money then it needs to be an increase in liability (a decrease in the negative balance), If the money was paid to the director then it's a decrease in liability (an increase in the negative balance)

 

Hope that helps?

 

Kindest regards

 

RoscoPC

 

Terms & ConditionsAccessibility statement