If he is the sole proprietor then it becomes equity, also called as additional paid in capital when lending. But in this case, yes a director can give the money and it can be accounted for. A separate account must be created for this for example "Directors loan account" or "additional paid in capital" and must be disclosed very clearly that the money is invested for working capital and the profit arising from it could be treated as retained profits until the next year without a liability to payback. In SOFP current asset side, disclose it as "the company is not 'in credit' to pay the director his money back". Correct me of I am wrong.
