where to enter source for double entry

[Mike or Penny Novack]

Girard Aquino wrote:

>Hi. I am trying to pay off a debt we have with one of our family 
>members. being an insurance agent, we bought a life insurance from him, 
>and he was kind enough to credit 500 from his commission into our debt 
>(not sure if i said that correctly - i mean he took off 500 from his 
>commission and considered it payment from us for our debt). since 
>gnucash always looks for a source for the money you transfer between 
>accounts, where should I enter this amount as coming from? thank you.
>  
>
"Forgiveness of debt" (an account of type income -- though whether you 
will have to declare as income depends upon the tax laws of your 
jurisdiction). Normally transactions that are income would be an 
increase to one of your asset account but here it's a decrease to a 
liability. If you have lots of "gift" income you might want to make 
"forgiveness of debt" a child of "gifts". Normally we don't have to 
account for "gifts" unless over a certain amount, but where forgiveness 
of a loan is a gift, can get very complicated (in this jurisdiction, not 
only the size but the purpose of the loan might matter).

The fact that the source of the money he "forgave" was his commission 
not relevant on your books (though it is on his).

Michael