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July 26, 2019
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Recording directors loan and using dividends to repay at year end

  • July 26, 2019
  • 1 reply
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Hi All, Since starting out I have made 6 bank transactions from my business current account to the two shareholders current accounts.

I wish to record these as directors loans, for which I have been advised to create a journal entry for each transaction.

This is how I have handled the loan payment:

    1. Journal for CR business current account & DR directors loan account (setup as a current asset account).
    2. 2. Then matched the bank transaction to the journal.

Then at year end I now need to repay the loan using dividends, there was enough profit to repay the loans made in the last FY, so now I need to pay down the loan and record the dividend. This is where I come unstuck? I've read lots of stuff about where this important transaction needs to sit.... Can anyone offer any guidance on this.

Your help is greatly appreciated.

Best answer by Rustler

Use a journal entry
debit retained earnings, credit director loan account

1 reply

Rustler
RustlerAnswer
July 27, 2019

Use a journal entry
debit retained earnings, credit director loan account