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bigduckontax, Accountant
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There, I have a client who is the Director of a Ltd company,

Hi there,
I have a client... Show More
Hi there,
I have a client who is the Director of a Ltd company, which became incorporated 10.03.2014.
On a Ltd company invoice dated 18.03.2014...a payment on account was received 27.02.2014 into the Directors personal account 27.02.2014.
There were also expenses paid out of the Directors account prior to incorporation against this invoice.
How should the pre-incorporation income/expenses be treated?
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Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question. This happens to nearly every company on incorporation and the general rule is that pre incorporation expenses are brought to account [Debit eg Initial expenses Credit Bank/Cash] on the incorporation date and paid out from the company as soon as funds are available to reimburse the Director or indeed anyone else. As they are not emoluments they do not require to pass through PAYE arrangements, directors, of course, being employees per se. You have not said what the 'payment on account' was for. If, for example, it was by a customer for services provided by the company then they should be adjusted out of the Director's Account and posted eg to Sales. I do hope that my reply has been of assistance.
Customer reply replied 2 years ago.

Thank you for your reply -

The invoice was for services and goods used for those services - the trade is installation of home entertainment systems.

It does not appear that the Director transferred the income to the Ltd Co bank account or has had the expenditure reimbursed.

can I set one off against the other and just increase the director loan account for the balance?

many thanks.

I would suggest that it would be a most convenient method of clearing these matters. I assume that there will be a credit balance in the Director's Loan account to preclude the problems associated with the loan to a director by the company.
Thank you for your support.