Am I able to create a shareholders account in the P&L as expense to an account in the equity section of balance sheet.
We expense the shareholders salary it would be nice to put in one amount and it comes up in the other account to
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No
If a shareholder is paid a salary, then the shareholder is also an employee and the two roles aren’t the same entity so shouldn’t be linked.
The shareholder invests into the business. The employee works for the business.
Ok maybe my words is not correct
it is an un-taxed salary so there for it goes in expenses because it is a cost to the company. It is not a PAYE salary so it is a subcontractor just happens to go to the only shareholder in the company
Shareholder / Employee - Shareholder / Sub-contractor.
What’s the difference, they are both separate entities
Payments to shareholders - distribution of profits
Payments to employees / sub-contractors are an expense
A payment to a sub-contractor can’t also be a payment to the shareholder
In a shareholder corporation, the only entries that go to the Balance Sheet Equity section are the capital contributions for issued shares - all other shareholder transactions are posted to a Balance Sheet - Liability - Shareholders Loan account or Shareholders Current Account (C/A)
I was taught at uni that you can put the profit to shareholders salary in the P&L and ofset it to the current account shareholders salary in the balance sheet. and every accountant I worked for did it that way.
so I was looking for a way to say put it to one account and it automaticly puts the ofset in the other account nut I guess not
Sorry but you are being completely confusing within this subject which makes it very hard to follow.
First post you stated: We expense the shareholders salary
Second post you stated: it is an un-taxed salary and It is not a PAYE salary so it is a subcontractor
Third post you stated: can put the profit to shareholders salary and current account shareholders salary in the balance sheet.
Hopefully you were taught at varsity the clear distinction between shareholders, directors, employees and sub-contractors and their respective roles.
So to sort this out - What every accountant you worked for was doing, was this:
Where there is a tax deferential between the corporation rate (say 40c in the dollar) and the individual rate (say 25c in the dollar) then they would generate an expense which would reduce the profit - they did not “put the profit to shareholders salary in the P&L” as you stated.
The expense options are:
- allocating a salary to the shareholder but as an employee. This allocation would have to be supported by the appropriate PAYE documentation.
- if the shareholder is also a Director then the corporation could pay Director Fees
- the shareholder could invoice the corporation for consultancy fees - this doesn’t make them a sub-contractor
All these expense types would have the impact of reducing the corporations profit.
To take these up in the accounts without making an actual payment you would:
Credit - BS - Liabilities - Shareholders Loan account
Debit - P&L - Expense - Salaries or Director Fees or Consultancy Fees
Credit - BS - Liabilities - Shareholders Loan account
Debit - P&L - Expense - Salaries or Director Fees or Consultancy Fees
This is what I do
any how my question was not about accounting it was if I can have a control account going from the P&L to the balance sheet
Yes I did and saw at the bottom that you can not join a P&L account
but thanks for replying