Bad Debt

[Hilary]

Yes - basically we collect dues for services but sometimes a member will 
drop out or not have enough money to pay.  I don't just want to zero out 
the invoice - I want to be able to figure out how much we weren't able 
to collect.

I've been reading about contra receivable accounts but unsure if that 
works in Gnucash.  The invoice is currently a receivable.  But I can't 
"pay" the invoice from another expense account.  So I wasn't sure if I 
should create a liability account and then create a transaction from the 
bad debt expense account to liablities or create a bad debt receivables 
account or just a regular income account? Sorry - accounting is not 
completely my forte.

Does that make sense?

Thanks for your suggestions.

-
Hilary


On 05/30/2013 01:12 PM, Buddha Buck wrote:
>
> On Thu, May 30, 2013 at 12:51 PM, Hilary <hilary at mayfirst.org 
> <mailto:hilary at mayfirst.org>> wrote:
>
>     Could anyone help me with a step by step way to account for bad
>     debts?  I get the basic idea but am unsure how to implement on
>     gnucash.  Any help would be appreciated.
>
>
> It depends on how you are accounting for good debts, and if you are 
> talking about debts owed to you that you are writing off, or debts you 
> owe to others that are forgiven.
>
> In the "owed to you, but will never be paid" category, presumably the 
> debt was originally recorded in an asset account like "Assets:Loans" 
> or "Assets:Loans:Bob Smith".  In which case, if you need to write off 
> the remaining $10,000 of the loan, you would go into the loan account 
> and add a transaction reducing the loan amount (as if it were a 
> payment), but set the counteraccount to be "Expenses:Bad Loans" or 
> something similar.
>
> The end result should be that the outstanding amount of the loan is 
> reduced to 0, and the Expenses:Bad Loans account is increased by 
> $10,000 (in this case).
>
> In the "owed by you, but was forgiven as bad debt" category, you would 
> presumably have a Liability:Loans account, in which case you do the 
> same thing, but set the counter account to be "Income:Forgiven Debt".