Repayments of director investment in P&L

[xoggoth]

In the P&L for my contracting company it showed profit and then subtracted dividends to arrive at "retained value for the year".

Now trying to do accounts for a very small company (not contracting) that made a loss in previous years. In this case would I be correct in subtracting repayments of money put in by directors as well as dividends in the P&L? It seems logical that it can't be retained value if it has been paid out.

Can't find anything very helpful on net or in my books so cheers for any advice.

[Emigre]

Funds put into a limited company by a director are either for the subscription of shares, in which case the balance sheet will show increase in cash and increase in share capital, which will be an increase in retained value of the business.

More sensibly it will be a loan by the director to the company which will show as an increase in cash and increased short term creditors (less than 1 year).

Dividends are a distribution of profits after tax and rightly directly impact the retained value in the company, being a withdrawal. Loans by directors are never passed through the P&L account since they do not impact the retained value of the business. Yes, they increase the cash balances so it may look like increased value but the director can call for repayment of that loan at any time.

Just reread your Q. Be careful about paying dividends if there are prior year accumulated losses. There are strict rules regarding protection of creditors interests.

I strongly recommend getting an accountant on board.

[xoggoth]

Cheers emigre. An accountant is not an option as the fees would swallow all our meagre profits at the moment unfortunately.