[GNC] Rental property - How to account for delinquent rents?

[David Cousens]

You could use the Business Features Accounts Receivable process to create an
invoice when the rents are dues and then record the payments when they are
received. You don't necesarily have to post invoices to the tenant but you
could - it might help remind them. The tutorial Guide has an outline of the
use of the business features
(https://www.gnucash.org/docs/v3/C/gnucash-guide/chapter_bus_features.html).
The account s receivable section is most relevant.

It will depend a bit whether you are required to use accrual or cash
accounting what is the best method. A direct writeoff method simply does

Expenses:Bad Debts              Dr xxxx
Assets:Accounts Receivable             Cr xxxx

but this has problems particularly if you write the bad debt off outside the
accounting period (usually annual) in which the rent was due as there is not
a matching of the recording of theexpense with the recording of the income.

It may be possible to use a Credit Note ( a reverse invoice)  to create the
above transaction reord. The business features are not generally tolerant of
manual entries to reverse operations. Someone else may be able to advise
whether this will work.

Another way to do it is to not use the inbuilt business features at all  but
setup a manual Accounts Receivable system.

You would need to setup:
Asset:Rent:Accounts Receivable
Income: Rent
Expenses:Rent:Bad Debts

Recording a rent apyment due would be

Asset:Rent: Accounts Receivable        Dr xxxx
Income:Rent                                    Cr xxxx

recording receipt of the payment
Asset:Bank:Checking                       Dr xxxx
Asset:Rent:Accounts Receivable        Cr xxxx

recording a rent payment not received and written off

Expenses:Rent:Bad Debts               Dr xxxx
Asset:Rent:Accounts Receivable      Cr xxxx

Exactly how you handle this and the timing of recording the various events
will depend on your tax situation, local taxation legislation etc. You
should not consider the above as advice in any way and you should consult a
local accountant for an optimal method for your situation.

David Cousens



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David Cousens
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