[GNC] Posting a bad debt

[Adrien Monteleone]

> On Apr 9, 2019, at 6:07 PM, Greg Feneis <mfeneis at gmail.com> wrote:
> 
> Since people are trying to associate a non payment with an expense account, does not getting paid by a customer actually constitute an expense?

Generally, yes, it is revenue earned, but needs to be deducted so as not to affect income because it wasn’t actually collected.

Income = Revenue - Expenses (accounting text book definition)

> 
> I imagine in business, the big concerns with expenses are tracking where the revenue that doesn't become profit goes, and (at least in the US) getting tax deductions for as many deductible expenses as possible to minimize  tax liability. 

Non-collectible receivables are reductions to Income in a similar way that Discounts and Allowances are. One way to do that is via an Expenses:Bad Debt account. (again, generally)

> 
> As a sole proprietor, I think when I can't collect an invoiced amount, that's just income I can't receive.  I don't think it's an expense.  It's not revenue spent on something, and it's not tax deductible, AFAIK.  

Depends on your jurisdiction tax laws and the exact legal form of the business.

> 
> Sorry, I don't mean to hi-Jack the thread, it's kind of related.   
> 
> 
> 
> 
> Kind regards,
> 
> Greg Feneis

Certainly, related, but the answer for any specific situation should be given by a competent local CPA. My recommendation was for the generic formal treatment of the situation.

We don’t give actionable tax or accounting advice here, but rather how to accomplish accounting tasks using GnuCash.

Regards,
Adrien