Diebit balances in directors account

This query is : Resolved 

16 April 2009

Dear Sir/Madam

Please prescribe the treatment for the debit balances in directors account who are also the shareholders of the company.

Thanks & Regards
CA Sayeeda Banu

Deepak Goel (Expert)
16 April 2009

Director's account balance never be debited. Director can give loan to company but they cannot take loan from co. Director should return should their amount immediately.

sayeeda (Querist)
17 April 2009

Actually the directors loan account is having a debit balance. I want to know how the company should deal with this and what are the consequences of writting off of this balance. Can it could be settled by declaring dividend.

Please give me the accounting entries to be passed by the company.

17 April 2009

Just calculate the interest and if the debit balance is less than the interest than treat the balance as interest. or else see if any remuneration or incentive payable to directors and trf. the debit balance to such accounts.

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