Director/employees salaries

[itpba]

Hi Gurus, Can you please put some light on this.if a company has let suppose 30k sales and accounts it shows like this:

Sales 30K

Less:
- directors salary £££
-employees salaries ££
-depreciation ££
- all other expenses ££

Profit : £700.00


means a company has made slight profit after all expenses but in accounts employees salaries is deducted from sales so how do we show that employees are paid from investment not sales?

[hina_pirzada]

if ur sale is 30k and your investment is 50k means the incoming in the account is 80k.

Sale 30k
Invest 50k
Tot 80k

Director Salaries 20k

Means u have left 60k

rest of the expenses employee salaries + etc will be deducted from Investment and sale.

[itpba]

if ur sale is 30k and your investment is 50k means the incoming in the account is 80k.

Sale 30k
Invest 50k
Tot 80k

Director Salaries 20k

Means u have left 60k

rest of the expenses employee salaries + etc will be deducted from Investment and sale.

thanks, But in accounts the 50K in balance sheet page and on profit and loss shows ilke this:

Sales 30K

Less:
- directors salary £££
-employees salaries ££
-depreciation ££
- all other expenses ££

Profit : £700.00


doesnt thsi show that employee salary is paid from sales ?? this is my concern, how do we show that emp salaries paid from investment not sale

[zimba]

What are you talking about ?? Company accounts show money in money out.
Director's remuneration must be less than your profits

[rajbhanu300]

Hi,
So does that mean the director can take the salary only if the company is in profit?

[zimba]

Hi,
So does that mean the director can take the salary only if the company is in profit?

There are no rules governing this. You have to apply common sense. If you are making no money or very little money, you cannot pay yourself salary as that is will come from your investments and will be excluded.
If you company is making 40K and your salary is 50K, then you are paying yourself money from the investments.

[rajbhanu300]

Thanks Zimba88.
But I want to know if company has already done expenses worth £50000 excluding director's salary/remuneration and the company is in loss as well, than in that case, can the director take the salary?

[zimba]

Thanks Zimba88.
But I want to know if company has already done expenses worth £50000 excluding director's salary/remuneration and the company is in loss as well, than in that case, can the director take the salary?

Sure. You will not face issues if you spent all your investment

[itpba]

What are you talking about ?? Company accounts show money in money out.
Director's remuneration must be less than your profits

Hi Zimba, tnx for response.

i mean we dont include money invested by director in the SALES, Do we? and then we deduct expenses from sales including employees salaries and if there is profit then pat tax on that profit. so from here i though aren`t we deducting emp salary from sales ? how do we show that its from investment? can we also include invsetment transaction of director in the SALES?

[zimba]

i mean we dont include money invested by director in the SALES, Do we? and then we deduct expenses from sales including employees salaries and if there is profit then pat tax on that profit. so from here i though aren`t we deducting emp salary from sales ? how do we show that its from investment? can we also include invsetment transaction of director in the SALES?

You pay your expenses from cash in the bank. Now that can be from investments or sales. You cannot differentiate it. Your employee's salary comes from that cash. In your accounts you only clarify how much cash came in or went out and for what purposes.
HO simply does not want you to deposit cash in your account and then pay it back to yourself as salary or leave it there untouched and call it investment.

[itpba]

i mean we dont include money invested by director in the SALES, Do we? and then we deduct expenses from sales including employees salaries and if there is profit then pat tax on that profit. so from here i though aren`t we deducting emp salary from sales ? how do we show that its from investment? can we also include invsetment transaction of director in the SALES?

You pay your expenses from cash in the bank. Now that can be from investments or sales. You cannot differentiate it. Your employee's salary comes from that cash. In your accounts you only clarify how much cash came in or went out and for what purposes.
HO simply does not want you to deposit cash in your account and then pay it back to yourself as salary or leave it there untouched and call it investment.

Thanks Zimba88, can we include investment (those transaction) in SALES as well?

[zimba]

Thanks Zimba88, can we include investment (those transaction) in SALES as well?

No. You pay taxes on your profits from sales which is (turnover/sales - expenses)
You investment is a director's loan and not part of your turnover. Please talk to you accountant

[n8net]

but i hv seen in this forum , ppl successfully extending their Tier 1 E, with just running a business from sales and leaving the investment untouched sitting in the bank account.

so was this one off ? i just want to confirm that all the investment of 200k need not be "spent" before the extension ?

thanks

[zimba]

but i hv seen in this forum , ppl successfully extending their Tier 1 E, with just running a business from sales and leaving the investment untouched sitting in the bank account.

so was this one off ? i just want to confirm that all the investment of 200k need not be "spent" before the extension ?

thanks

No requirement to spend all the money, however if HO sees that you made unacceptable investments (in property, paid previous owners, returned to yourself as salary, etc) they can refuse your application.

[Aliveli]

zimba88 - does the firm really need to make a profit before it can pay a salary to its Director. For simplicity lets assume I buy good worth £50k and sell it for £52k - I make a gross profit of £2k. My overheads are:
Salary to staff £1k and Rent £1k. Net profit is £0.

Can I not argue that the payment to staff and rent is from investment, which then leaves £2k which can be paid to the Director.
I mean when we look at the overall cashflow
In £52k and Out £54k

[CR001]

zimba88 - does the firm really need to make a profit before it can pay a salary to its Director. For simplicity lets assume I buy good worth £50k and sell it for £52k - I make a gross profit of £2k. My overheads are:
Salary to staff £1k and Rent £1k. Net profit is £0.

Can I not argue that the payment to staff and rent is from investment, which then leaves £2k which can be paid to the Director.
I mean when we look at the overall cashflow
In £52k and Out £54k

Kindly start your own topic with your questions rather than tagging onto another members thread. It creates confusion.