The Director’s Loan Account is a running tally of what the company owes to the Director.

Every time the director puts their own money into the company this adds to the tally of the Director’s Loan Account. This could be a transfer into the company bank account but it could be that the Director pays a company liability (bill, tax etc) from their own funds.

Every time the Director takes money from the company or if the company pays for something that is their personal expense it deducts from the tally.

In this respect it operates much like a bank balance with money going in and out. The only record however, is in the bookkeeping found on the Balance Sheet.

Sometimes the Director ends up taking more money than they are owed and then the Director owes money to the company. This is called an overdrawn Director’s Loan Account.