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    nineslady's Avatar
    nineslady Posts: 2, Reputation: 1
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    #1

    Sep 25, 2008, 05:44 PM
    Ethics Lesson
    The treasurer of Wilson Sales Co. Patrick Axle, borrowed $50,000 from the company and placed a note in his desk drawer, promising to repay the loan. However, Patrick did not record the loan on the company's books, and therefore did not report the loan on the company's balance sheet.



    Should Patrick have borrowed the money from Wilson Company? Should the loan be recorded and reported on Wilson Company's balance sheet? If so, in what kind of account should the loan be recorded?
    tlarocca's Avatar
    tlarocca Posts: 17, Reputation: 1
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    #2

    Sep 26, 2008, 06:20 AM

    Hi

    Patrick should definitely NOT borrow money from the company without approval of the company's directors or owner. This is definitely theft.

    With proper approval, the loan must be entered into the books as a loan receivable.

    The receivable should be shown as a "non arms' length" asset, so that anyone can ascertain the legal implications of it i.e. it may be more difficult to collect this than an arm's length agreement.

    A valid loan of this type should be described as "Loan to Officer", or "Employee Loan".
    nineslady's Avatar
    nineslady Posts: 2, Reputation: 1
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    #3

    Oct 1, 2008, 07:40 PM
    Comment on tlarocca's post
    Very accurate response
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