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How to explain transactions using the director’s loan account

This article describes how to explain bank transactions that are paid into and out of your business bank account to a director’s loan account.

Once the bank transactions have been imported into your FreeAgent account via a bank feed or uploaded from a bank statement, you will need to follow the steps below to explain the money lent by a director and the money paid back to a director using the appropriate ‘Type’ and ‘Category’.

Please note that you need to have level 6 access or above to your FreeAgent account to explain bank transactions. The director that will be lending the money and receiving it back will also need to be added as a user in FreeAgent.

A director’s loan account is automatically created when you add a new user with the role of ‘Director’. The options listed below will only be available if your FreeAgent account is listed as a limited company.

Explaining money lent to the company by a director

Navigate to the ‘Banking’ tab at the top of the screen and select ‘Bank Accounts’ from the drop-down menu.

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Choose the relevant bank account from the list.

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Select the transaction that you would like to explain.

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Select ‘Money Received from User’ from the transaction ‘Type’ drop-down menu. Please note that this option will only be available for business bank accounts. You won’t see this option if the bank account has been marked as personal or for a user who has been allocated the role of ‘Accountant’.

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Select the relevant director from the ‘Received from’ drop-down menu.

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Select ‘Payment to Director Loan Account’ from the ‘Category’ drop-down menu.

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Select ‘Explain Transaction’ to complete the process.

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If you have more than one transaction that you need to explain as a director’s loan account payment from the same director, tick the checkboxes to the left of the relevant transactions and select ‘Money Received from User’ from the ‘Type’ drop-down menu in the panel on the right-hand side.

Select the relevant director from the ‘Received from’ drop-down menu, select ‘Payment to Director Loan Account’ from the ‘Category’ drop-down menu and select ‘Explain [X] transactions’ to explain all the selected transactions in the same way. Remember to include an appropriate description for the selected transactions. If you leave the ‘description’ field blank, the transactions will be given the original descriptions that came through for them via the bank feed import or bank statement upload.

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For more information on explaining multiple transactions at once, please see this article.

A record of the bank transaction(s) being explained will appear in your Audit Trail report.

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Explaining money paid back to a director

Navigate to the ‘Banking’ tab at the top of the screen and select ‘Bank Accounts’ from the drop-down menu.

Contra_1.png

Choose the relevant bank account from the list.

Contra_2.png

Select the transaction that you would like to explain.

Screenshot_2021-09-10_at_17.01.22.png

Select ‘Money Paid to User’ from the transaction ‘Type’ drop-down menu. Please note that this option will only be available for business bank accounts. You won’t see this option if the bank account has been marked as personal or for a user who has been allocated the role of ‘Accountant’.

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Select the relevant director from the ‘Payment to’ drop-down menu.

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Select ‘Payment from Director Loan Account’ from the ‘Category’ drop-down menu.

Screenshot_2021-09-10_at_17.03.31_copy_3.png

Select ‘Explain Transaction’ to complete the process.

Screenshot_2021-09-10_at_17.03.31_copy_4.png

If you have more than one transaction that you need to explain as a director’s loan account payment to the same director, tick the checkboxes to the left of the relevant transactions and select ‘Money Paid to User’ from the ‘Type’ drop-down menu in the panel on the right-hand side.

Select the relevant director from the ‘Payment to’ drop-down menu, select ‘Payment from Director Loan Account’ from the ‘Category’ drop-down menu and select ‘Explain [X] transactions’ to explain all the selected transactions in the same way. Remember to include an appropriate description for the selected transactions. If you leave the ‘description’ field blank, the transactions will be given the original descriptions that came through for them via the bank feed import or bank statement upload.

Screenshot_2021-09-21_at_14.20.19.png

A record of the bank transaction(s) being explained will appear in your Audit Trail report.

Screenshot_2021-09-24_at_11.53.03.png

For information on viewing a director's loan account in FreeAgent, please see this article.

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