Standard Accounts and Director wages as a separate entry

[ishfaqsangra]

Hi
My accounts both years till now show Directors wages in expenses.Is it a standard practice in accounts to be mentioned or directors wages can be included under expenses or salaries as general entry?

[MYA]

Yes mr ishfaq it comes in statement of profit and loss and its business expense. However it comes as a director remuneration and after that any staff wages like wages of two employees .

[ishfaqsangra]

I understand that its expense but just to know to mention it as directors wages separately in accounts is a must?or it can be included under salaries or wages like other employees.

[raj.m]

I understand that its expense but just to know to mention it as directors wages separately in accounts is a must?or it can be included under salaries or wages like other employees.

Director's salary would be under a separate name "director's remuneration"

Salary of all other employees would under "wages"

[zimba]

Usually accounts have a section called Detailed profit and loss account for the year ended ... which shows employee and director's remunerations differently. This is important from taxation point of view as some forms of the director's remuneration are NOT tax deductible. So they are usually treated differently and calculated separately than employee wages

[ishfaqsangra]

Thanks so in a nut shell it is a standard accounts requirement.
My question is will Home office take into account all Directors Wages for all 3 year accounts and deduct it from DL investment.

I am going to re-inveset Directors Wages for the first two years when Business was in loss but my management accounts will have around 4000 taken when business was in profit for the third year and it is less than the actual profit(which is higher than that as per my understanding through other Posts and feedback). I am not going to reinvest that as it is from profit but it will be mentioned as Directors Wages in management accounts, will it create any issue?

[zimba]

It should not. No one really knows how HO is looking at that but logically given the accounts are yearly, you should expect a yearly inspection

[ishfaqsangra]

Thanks.
When we say yearly inspection what does this mean?
While doing management accounts it will take into account all 3 years.

[zimba]

Thanks.
When we say yearly inspection what does this mean?
While doing management accounts it will take into account all 3 years.

Each year on its own merits

[ishfaqsangra]

Thanks,
So Do or Can I ask Accountant to mention that

Year 1 or Year 2 Remuneration for Director is £xxx which is reinvested and year 3 remuneration is not from the investment as business is profitable sine xxxx date.

Or Just another statement saying " Director has invested over£50,000 excluding his own remuneration" as DL will be over 60,000 before the management accounts.

Things are getting very clear from accounting point of view but how Home office calculates it ,as you already mentioned , is difficult to understand.
Although I think avoiding salary even if you are profitable is ideal but survival becomes difficult.

[zimba]

I am not sure an accountant will be able to confirm these statements without an audit but I might be wrong.

[ishfaqsangra]

Thanks Zimba,
Accountant also advised wages to be reinvested while business was in loss but he said wages while business is in profit ,do not need to do any sort of reinvestment for that. Still few months to go, I will see how it goes.