Recording Personal Drawings and Director's Loans

You've taken a sum of money out of your bank account and used it for personal reasons.  Technically this is not a business expense so you can't claim for it but we still need to match it with the bank statement.  The transactions are entered using the Journal.  When adding entries to the journal, we credit the giver and debit the receiver.  This guide goes through the most common scenarios.

Personal Expenses or Drawings

For personal expenses that are paid from the business bank account, or if you are moving money to your own personal bank account, you can use the Ignore option.

First set up an account such as Withdrawing Account or Owner / Director Current Account (both accounts are like Director's Personal Expenses) under Settings > Chart of Accounts > Add Account.

Set the Account Type to be Liability.

Now when you are reconciling, click More Options > Ignore, then select the Liability account you made previously.  The software will generate an entry in Account Manager > Journals > Add Journal that will look something like this:

Image 141

The system will see these as transfers of cash and not expenses and will handle them differently.  The transaction will be removed from the Reconcile tab and will appear on both the Bank Statements page and Account Transactions page as Ignored.  The Account Balance will be updated accordingly so that you can continue to monitor this and compare it with your actual bank balance.

Director's Loans

Sometimes the owner of a business may deposit some of his or her own money into it, for example as cashflow when the business starts, and then withdraws this amount at some point in the future, or the business may loan funds to the owner which the owner then pays back to the company.  These transactions are recorded against a Director's Loan Account.

A Director's Loan Account is created as a liability account in Settings > Chart of Accounts.

Under Account Manager > Journals > Add Journal, again, you don't need to select a property but do fill in the rest of the details. The example below is showing money moving from the business to the director:

Image 142

If the director pays into the business as a loan, then you will need to reverse the above transactions.

If the drawings, loan payments or anything else that you are entering via a journal occurs on a regular basis (eg monthly), you can set up repeating journals.  There is a guide to adding these repeating journals here.