Request for assistance

[Tommy Trussell]

On Thu, Dec 13, 2012 at 1:07 PM, Hilary <hilary at mayfirst.org> wrote:

> Does anyone have a good process for accounting for bad debts?
>
>
Greetings! You should check with a certified accountant -- they will tell
you exactly how the debt should be handled for your particular situation.

Here is what I have done (from memory).

When I made the loan, I created an account Assets:Loans:Name of Borrower

I created an entry for the loan amount, and then any payments I received
created a transaction decreasing the principal in the loan account.

When I decided I could no longer collect on the debt, I created a negative
entry in the same account dated some point during the tax year for which I
chose to forgive the loan, with an amount equal to the remaining
principal. I told my accountant the amount of the loan I had forgiven. If I
recall correctly, the offset account I created was under income, and the
forgiving transaction created a negative income transaction.

I just noticed someone else pointed you to some accounting lessons, which
are probably infinitely better than anything I could supply.


> Thanks for any advice,
> Hilary
>

Hope that helps!



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