Gyle With one caveat. If the item is a capital item and its intended use is over a period which is longer than a single accounting period it would not normally be regarded as an expense but as a capital purchase. Most jurisdictions will have a threshhold value where the item can be expensed immediately if below a threshold value but is regarded as a capital purchase if above , i.e is recorded as an asset not as an expense.
David Cousens On Fri, 2021-12-10 at 15:18 +0000, Gyle McCollam wrote: > This is a lot different than your first explanation. Under these > circumstances where you sold the company electronic equipment, it is indeed > just an expense. On the company's books, it is the same as if the company had > bought the equipment from any other vendor and would in no way be a > "director's loan". Treat it like any other expense on the company's books. > > > Thank You, > Gyle McCollam > > Gyle McCollam > > 609.680.2326 Mobile > > gmccol...@live.com<mailto:gmccol...@gyleshomes.com> email > > ________________________________ > From: gnucash-user <gnucash-user-bounces+gylemc=gmail....@gnucash.org> on > behalf of Dr. David Kirkby <drkir...@kirkbymicrowave.co.uk> > Sent: Friday, December 10, 2021 8:13 AM > Cc: gnucash-u...@lists.gnucash.org <gnucash-u...@lists.gnucash.org> > Subject: Re: [GNC] Directors loan - do I need an expense account? > > On Fri, 10 Dec 2021 at 05:14, Adrien Monteleone < > adrien.montele...@lusfiber.net> wrote: > > > With the usual caveat that this is not formal advice, I agree with > > Michael. This looks like what we call "Owner's Equity" in my parts. > > > > If this is just for you, then my personal advice is keep it simple. > > > > Keep it in Equity. > > > > You can put the original 'loan' into "Owner's Equity", and any money > > taken out (or paid back) *from/by* the company can be in "Owner's Draw". > > (which should be a child of Owner's Equity so the parent results in a > > net amount at a glance.) > > > > If the Owner returns some of the Draw, that would simply be a reversing > > type transaction in the Draw account, or an increase in their main > > Equity account. (though I suppose you could track it in a separate child > > account still if you wanted, but unnecessary as a report can handle that > > detail.) > > > > An Accounting textbook would most probably advise that none of this > > involves expenses or revenue. (unless you start introducing 'interest > > paid' in either direction.) > > > > Equity is already understood to be a 'liability' of a special type — to > > the owner(s). It usually is *not* recorded as normal liabilities, > > because those are usually short term (less than one year) or long term, > > but Equity is essentially on indefinite terms. > > > > Regards, > > Adrien > > > > The more I think about this, and look at our government's website about > director loans > > https://www.gov.uk/directors-loans > > I believe I *might *be right in saying the following. > > 1) My accountant is using the term* "directors loan"* rather loosely to me, > but the way he is recording the transactions to HMRC is accurate. > 2) Me confusing you guys, but saying it's a* directors loan*, whereas in > fact, it does *not *meet the definition of a director loan from > https://www.gov.uk/directors-loans > > The original source of this "debt/liability/expense" or whatever you want > to call it, was *not *me paying money into the company. Instead I sold the > company some expensive electronic test equipment, and other items at a fair > market value, The market value was determined by looking at the selling > prices on eBay. A record was kept of some eBay auctions, so if it was ever > queried, I have proof the amount it was sold to the company for was fair. > An *invoice *was provided by me personally to the company. > > I personally paid $16,000 for one of the items a year or more before > setting up the company, but it was sold to the company for less, as it > would have depreciated in that time. So from when the company started > trading, it had everything it needed. No cash was actually needed. > > That being the case, I think it's probably right to consider this an *expense > *- it is not much different from if the equipment was purchased from a test > equipment dealer, although they would typically want repaying within 30 > days, whereas my invoice did not state when it had to be repaid by. Since > setting up the company, I've sold some other items to the company at a fair > market value. > > When I look on the company's balance sheet, there is section > > * Creditors: Amount falling due within one year > > My accountant is computing the "Creditors: Amount falling due within one > year" by including the money the company owes to me personally. It's not > recorded in another section of the balance sheet, which is "Shareholders > funds". > > So if I'm not mistaken, I'm simply a creditor. The company just owes me > money for goods I have supplied, but not been paid for. Therefore this > should be recorded as an expense. Does the above seem logical? > > If so, in GnuCash, I should probably have an account > > Expenses -> Test Equipment. > > and record the transactions under that. But given historically I've had a > "directors loan" tab in Excel, I might as well just continue with that. > > I realise many on here are not accountants, and those that are accountants > are not going to want to be held responsible for their comments, but does > the above seem reasonably logical? > > Dave > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. > _______________________________________________ > gnucash-user mailing list > gnucash-user@gnucash.org > To update your subscription preferences or to unsubscribe: > https://lists.gnucash.org/mailman/listinfo/gnucash-user > If you are using Nabble or Gmane, please see > https://wiki.gnucash.org/wiki/Mailing_Lists for more information. > ----- > Please remember to CC this list on all your replies. > You can do this by using Reply-To-List or Reply-All. _______________________________________________ gnucash-user mailing list gnucash-user@gnucash.org To update your subscription preferences or to unsubscribe: https://lists.gnucash.org/mailman/listinfo/gnucash-user If you are using Nabble or Gmane, please see https://wiki.gnucash.org/wiki/Mailing_Lists for more information. ----- Please remember to CC this list on all your replies. 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