How to enter a Director’s Loan into a Reckon One Book

Legacy KB ID: 5447

Question

How do I enter a Director’s Loan into a Reckon One Book?

Answer

You should speak with your accountant or bookkeeper for the best way to handle this situation for your circumstances. 

If you wish you can approach a Reckon Accredited Partner who will be happy to help.  You can find one at: https://partnersearch.reckon.com/

We offer the following as a guide only and you may need to make adjustments to the suggested steps for your specific circumstances.

 

The steps you take will depend on how the Director’s Loan was granted and for what purposes it is to be used:

  1. Startup capital for the Business
  2. Injection of capital for the Business
  3. Acquiring a specific asset
  4. Used to pay ongoing expenses and asset purchases.

 

Before you start you should create a Director’s Loan account:

  1. Settings > Chart of Accounts > Liabilities > Add.
  2. Give the account a name - like "FirstName LastName - Director's Loan".
  3. Change and fill out any other relevant fields.
  4. Click Save &Close.

If you intend to use the account for purpose (4) above, then you can create the account as a Bank Account of Credit Card account. 

 

To record Startup capital

Normally startup capital is booked against an Equity account (owners' equity; opening balance equity).  Sometimes, the Directors will lend the money to the business rather than treat it as equity in the business.

Process a Journal to record the addition of cash:

  1. Go to Advisor > Journals > Add.
  2. Enter a Date.
  3. Enter a Summary - e.g. "Director's Loan for startup capital."
  4. In Amounts, select "Non-taxed";
  5. In the table below, select the account: "FirstName LastName - Director's Loan";
    If more than one director is involved, you will need a separate account for each director;
  6. In the Credit field, enter the amount of the loan;
  7. Click on the Add a new row button;
  8. Select your Bank Account;
  9. In the Debit field, enter the amount of the loan;
  10. click into another field and check the totals line that Debits equals Credit;
  11. Click on Save & Close.

 

To record an injection of capital

After the business has been in operation for some time the business may need additional cash, which the Directors may supply in the form of a Directors’ loan rather than as equity.

Process a Journal to record the addition of cash:

  1. Go to Advisor > Journals > Add;
  2. Enter a Date;
  3. Enter a Summary - eg "Director's Loan for injection of capital"
  4. In Amounts, select "Non-taxed";
  5. In the table below, select the account: "FirstName LastName - Director's Loan";
    If more than one director is involved, you will need a separate account for each director;
  6. In the Credit field, enter the amount of the loan;
  7. Click on the Add a new row button;
  8. Select your Bank Account;
  9. In the Debit field, enter the amount of the loan;
  10. click into another field and check the totals line that Debits equals Credit;
  11. Click on Save & Close.

 

Acquiring a specific asset

Sometimes an owner will buy an asset from personal sources for the business.  Rather than treat the item as equity the Director may choose to treat the Asset value as a loan to the business.

Process a Journal to record the addition of cash:

  1. Go to Advisor > Journals > Add.
  2. Enter a Date.
  3. Enter a Summary - e.g. "Director's Loan for acquisition of asset."
  4. In Amounts, select the appropriate tax code - "Non-taxed", Net or Gross.
  5. In the table below, select the account: "FirstName LastName - Director's Loan".
    If more than one director is involved, you will need a separate account for each director.
  6. In the Credit field, enter the amount of the loan.
  7. Click on the Add a new row button.
  8. Select the appropriate asset account.
    If one does not exist, click on Add Account and create it.
    The nature of the purchase may require the use of multiple accounts and tax codes.  Please refer to your accountant for direction.
  9. In the Debit field, enter the amount of the loan.
  10. Click into another field and check the totals line that Debits equals Credit.
  11. Click on Save & Close.

 

Paying ongoing expenses

Sometimes an owner will pay business expenses from personal funds and then on a regular basis refund himself.

  1. Create a new bank account (or credit card account): 
    1. Day to Day > Banking > Bank Accounts > Add.
    2. Give the "bank account" a name - e.g.: Director's transaction Account.
    3. Complete other relevant fields.
  2. Pay and receive money as needed from this Bank Account.
  3. From time to time refund the owner from the business account: 
    1. Day to Day > Banking > Transfer Money > Add.
    2. and complete a transfer.

** Please note, this method will not show a Director's Loan as a liability, only as a negative bank balance.

You can also use a Credit Card account instead of a Bank Account.

 


Need more help?

Ask the Reckon Community at: https://community.reckon.com/categories/reckonone

Or Log a Support Ticket: https://www.reckon.com/au/support/

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