Directors Loan Account in Xero
Xero Accounting are leading the way in the UK with online accounting software. In our opinion Xero is the best and easiest to use online accounting software for small businesses. Recording a Directors Loan Account in Xero Accounting is easy. See our Directors Loan Account page for more details about what it is. If you need specific help with Xero, we are Xero specialist accountants – see our fixed fees.
Setting up the Directors Loan Account in Xero
Xero provide by default a Directors Loan Account (830). However, it will be much easier to avoid using the default Directors Loan Account in Xero account except where it is the only option (e.g. when using Xero Payroll). Instead, we suggest you add a credit card account and call it a Directors Loan Account. By doing this, it becomes much easier to add expenses directly to the Directors Loan Account in Xero, and transfer money to/from it and the company bank accounts. Here is how you set it up:
Click on Accounts, Bank Accounts, then Add Bank Account. Type into the bank search ‘Directors Loan Account’ it won’t find a bank called that so you can then click on Add it Anyway. Type ‘Directors Loan Account’ again in the Name, choose Account Type: Credit Card, then enter any 4 numbers for the credit card number. Finally click Save.
That’s it, you can now use your new Directors Loan Account from the Xero Dashboard to add your expenses (spend money) and record transfers (transfer money) to/from the Directors Loan Account in Xero.
Entering transactions in the Directors Loan Account in Xero
It’s very easy to enter transactions to the Directors Loan Account in Xero when it is set up as described above. As with Wave, you need to ask yourself – has the transaction gone through a company account e.g. company bank account or company credit card which is recorded on Xero?
If the transaction has gone through a company account, we are assuming that you have a bank feed set up or you have uploaded bank statements:
- Go to the bank account
- Click on Reconcile
- Find the transaction
- Click on Transfer
- Select the Directors Loan Account
- Edit the reference if it’s not clear
- Click on OK
If the transaction has not gone through a company account, and there is no bill or sales invoice for it in Xero:
- Go to the Directors Loan Account in Xero
- Click on Manage or Manage Account
- Click Receive Money if the amount was received by the director
- Or click Spend Money if the amount was paid by the director
- Enter the details: to, date, description, amount
- Select the appropriate account – usually a Revenue or Expense account
- Click save
If the director paid or received a bill or sales invoice that’s already on Xero: Find the bill or sales invoice; go down to the section ‘make/receive a payment’; enter the details and select the Directors Loan Account; then click on Add Payment.
Checking the balance of the Directors Loan Account in Xero
To check the balance of a Shareholder or Directors Loan Account in Xero, there are a few ways:
- Go to the Dashboard or Bank Accounts and see the current balance of the Directors Loan Account
- Go to Reports, All Reports, Balance Sheet, find the account
- Go to Reports, All Reports Trial Balance, find the account
- Go to Reports, Accounting Transactions, select the Directors Loan Account