Director's loans

Summary

How to record a director's loan in Sage Accounting.

Description

This article explains how to record money received as a loan form a company director. It also explains how to record the repaying and interest of a directors loan.

To do this:

Create new ledger accounts to track the outstanding amount of the loan and the interest paid
Record the receipt of the loan as Other Receipt
Record loan repayments as an Other Payment

Resolution

Create new ledger accounts

Before you record the Directors loan, we recommend you create two new ledger accounts. This is to record the amount of the loan and interest paid using the following details:

Name	Nominal code	Category	VAT rate
Directors loan	2300	Current liability	No VAT
Director loan interest	7301	Overheads	No VAT

We recommend the Nominal codes above based on our default chart of accounts. If you have a different numbering system, just use the number that suits your business.

We use the Category rather than the Nominal code to determine where the values appear on your reports.

From Settings, choose Business Settings.
Select Chart of Accounts, then New Ledger Account.
Enter the details and Save.

Record receipt of the loan

When you receive the loan in your bank account, record the receipt of the money using the new Directors Loan ledger account.

There are two ways you can do this.

Create a new receipt from your bank feed or bank statement import each month.
Manually enter as an Other Receipt.

▼ Using bank feeds or importing your bank statement

When you process your imported bank transactions

Select the new Directors Loan ledger account from the What dropdown list.
Select Create.

▼ Manually create bank transactions

From the Banking tab, choose New, then Sale / Receipt and Other Receipt.
Enter the details such as the date, amount received, and a relevant reference.
Enter the total amount of the loan and choose the Directors Loan ledger account. Don’t record any VAT.

Record the loan repayments

When you record the loan repayments, select the new Directors Loan ledger account. This reduces the balance of the loan on your balance sheet. Record the interest payments to a separate Interest paid ledger account. The interest payments appear on your Profit and Loss Report.

There are three ways you can do this.

Create a new payment from your bank feed or bank statement import each month.
Manually record your payment in the bank.
Set up a recurring bank payment. If you're using bank feeds or importing from a bank statement, simply match the payment each period.

In the following example, the loan repayment is £95.83 per month. £83.33 is the loan repayment and £12.50 the interest repayment.

▼ Using bank feeds or importing your bank statement

When you process your imported bank transactions:

Select the split icon.
On the first line:
- Select the new Directors Loan ledger account from the What dropdown list
- Enter the net amount of the repayment. In our example £83.33
On the second line:
- Select the new Interest paid ledger account from the What dropdown list
- Enter the interest amount. In our example £12.50
Select Create.

▼ Manually record your repayment

Use this when you don't have a bank feed and don't import your bank.

From the Banking tab, choose New, then Purchase / Payment and Other Payment.
Enter the details such as the date, total amount paid, and a relevant reference.
On the first line:
- Select the Bank Loan ledger account
- Enter the net amount of the repayment. In our example £83.33
On the second line:
- Select the Interest paid ledger account
- Enter the interest amount. In our example £12.50
Select Save.

▼ Make the repayment recurring

Edit the bank payment you've just entered.
Select Make Recurring, then complete the following:
- Repeats every - Enter how often you want the transaction to repeat. Then choose to repeat daily, weekly, or monthly. For example, to repeat a payment every ten days, in the first box enter 10, then from the second box choose Days
- Repeat Until - Enter the date of the final payment

Solution Properties

Solution ID: 222001000100822
Last Modified Date: Mon Mar 24 20:34:19 UTC 2025
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