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No one has any point?????????

ish kumar sharma (Sr. Manager Accounts & Finance) (301 Points)

20 August 2015

hi there< br> while checking the accounting done by previous accountant , i came to know that there is cash shortage from the beginning of the financial year as all the expenses are paid by the director of the company from the personal fund.< br> now how should i adjust the cash, can i pass the entry like cash a/c Dr to director's loan a/c and later on square the amount by paying the director's loan by company's cheque?

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Shishir Nayak ((Expert)) (369 Points)
Replied 20 August 2015

1) Business expenses incurred by an individual for the company use or benefit, which are to be reimbursed to the individual are the most common transactions, such as for business travel or meals or purchases of small items if they are authorized. For these costs, which are company expenses posted to company expense accounts, ideally the individual completes an expense report which requires an approval that is input as an A/P transaction voucher and they are reimbursed via A/P.

2) Loans to the company from Shareholder or Employee loans are much less common and usually significant amounts. These are funds loaned to the company that are agreed to be paid back to the individual and ideally there is a formal loan document stating the terms of repayment including dates and amounts and specifying if interest will be paid and how much. This would be setup as a Liability account, since the amount is Payable to the Employee or Shareholder, I prefer account name that says that, such as Note Payable to Shareholder or Employee, then it is clear what should happen with account.

Choice is yours to choose one of them. But If you are choosing Director loan account than you have to pay interest for that and u nee to have document of Loan.