An area that contractor\u2019s often ask about is Director\u2019s Loans. Based on the questions we get, we\u2019ve put together a comprehensive guide that covers everything you need to know, such as who can take a Director\u2019s Loan, guidelines for taking a loan and tax implications connected to it.\r\n\r\nNever be confused by a Director\u2019s Loan again by reading our guide, \u2018Everything you need to know about Director\u2019s Loans\u2019.\r\n\r\nIn this article, we\u2019ve decided to focus on Director\u2019s Loan Accounts.\r\n\r\n\r\nThe basics of a Director\u2019s Loan Account\r\nA Director\u2019s Loan Account is sometimes referred to as a director\u2019s current account or DLA. These terms are used to describe a record of transactions between a limited company and its directors and are noted down in the company\u2019s balance sheet.\r\n\r\nBalance sheets are used to show a company\u2019s financial status at a given point in time. The balance sheet details what the company owns (assets) and the amount it owes (liabilities), as well as what has been invested in the company.\r\n\r\nThe Director\u2019s Loan Account is used to show:\r\n\r\n\u00b7 What monies have been taken out (withdrawn) from the company\r\n\r\n\u00b7 Personal expenses that have been paid for by the company\r\n\r\nThis information is offset by:\r\n\r\n\u00b7 Net salaries and dividends that are due to the company\u2019s director(s)\r\n\r\n\u00b7 Reimbursements of expenses\r\n\r\nIf the limited company has more than one director, which it often has, each director will have its own Director\u2019s Loan Account section in the balance sheet.\r\nHow transactions look on a Director\u2019s Loan Account\r\nThere may be times when you need to loan your limited company money, to buy a new piece of equipment or to launch a new product, for example.\r\n\r\nThis means the company will owe you money and will be shown as a balanced owed to the director in the Director\u2019s Loan Account.\r\n\r\nOn the flip side, if you borrowed money from your limited company, this will show as a balance owed to the company by the director on the Director\u2019s Loan Account. Depending on other transactions, the Director\u2019s Loan Account may be classed as being overdrawn.\r\nKeeping your Director\u2019s Loan Account in good shape\r\nAs time goes on and money is taken out of the company, it\u2019s easy to lose track of transactions. Good record keeping can prevent this.\r\n\r\nIf records aren\u2019t kept up to date, payments and withdraws could be misallocated which can lead to the incorrect taxes being paid.\r\n\r\nIf record-keeping is not one of your strengths, we\u2019d advise you to engage with an experienced accountant who can help you understand if the account is in debt or credit.\r\n\r\nA Director\u2019s Loan is a notoriously complex area of legislation, and mistakes can easily be made without you realising it. For further guidance, please refer to our Director\u2019s Loan guide or speak to us on 01962 867550.