How to properly record £5k loan from director in CH accounts / HMRC?

RedMonty

I'm doing the accounts for a small non-profit company. It's not a charity, but it has non-profit clauses in the constitution, so most of the income is through grants from grant-making foundations and donations.

One of the directors has loaned the company a £5,000 interest-free loan (just before the end of the financial year) which they will expect to be repaid in due course. I think I have a handle on how to present this in the accounts for Companies House / HMRC, but I'd like to check with you guys:

Income / Turnover: +5000

Liabilities: (5000)
-> impact on cost of doing business: (5000)
-> impact on 'profits': (5000)

I usually mark all money coming in as 'turnover' because the company does not otherwise 'sell' anything. The money is spent on projects that support the community the company supports.

However this means that anything left over is recorded as 'profit' and in this case, it would mean paying corporation tax on the unspent £5000, which doesn't seem right. So I have to record that the company now has a liability to repay £5000, and take that out of the 'profit' for the year.

Have I done it right?

(I can also include a separate line in the accounts showing: Director's Loan Account: (5000) but this seems optional.)

Jeremy535897

In double entry bookkeeping terms, you debit cash at bank £5,000, credit creditors (in this case director's loan account) £5,000. There is no impact on turnover, cost of doing business, or profits. It isn't income.