[GNC] Best way to close unpaid invoices?

[Daffy Duck]

Thanks to you and Ron!

On Sat, 2021-03-06 at 23:56 -0600, David Cousens wrote:
> The methodology is a little different for each case.
> 
> Where they have not paid the full amount of the invoice without your
> acquiesence, then you would generally regard the unpaid amount as a
> bad
> debt.  In a direct write off, you would create an "Expense:Bad Debts"
> account and you would credit the Account Receivable account  by the
> amount
> of the write off and debit the Expense:Bad Debts account by the
> amount of
> the write off. Your income is unaltered at the amount recorded on the
> invoice and you are compensated by t the reduction in your Profit (
> and
> hence taxable income) by the amount of the bad debt.  The receivable
> in the
> form of the invoice is still active and you are still legally
> entitled to
> collect on the debt.  If the customer eventually paid you at some
> time
> later, you would create a transaction for the Bad Debt entry between
> Expenses:Bad Debts and Accounts Receivable at the time you receive
> the money
> and record the payments as usual.  Depending on whether your
> accounting is
> on an accrual or cash basis you may need further adjustments.  There
> are a
> number of ways of accounting for bad debts other than a direct write
> off
> where this is a regular feature in your business operations and you
> really
> need accounting advice if you need to implement them. 
> 
> if you agree to reduce the invoice amount, you could unpost the
> invoice,
> alter it appropriately and then repost it. This however does not
> record that
> you have offered the client a discount on the original agreed price.
> 
> An alternative would be to treat it as a discount on the sale. In
> this case,
> you would use a contra account to your :Income:Sales Revenue  account
> i.e.
> "Income:Sales Revenue:Sales Discounts". To record the discount,  you
> would
> credit the Accounts Receivable for the amount of the Discount you are
> applying to the invoice and debit " Income:Sales Revenue:Sales
> Discounts"
> for the amount you are discounting the invoice by. Again the Invoice
> remains
> at its original value and in this case your income is adjusted  by
> the
> amount of the discount.  
> 
> The above are possible accounting treatments. Whether they are
> allowable
> will be jurisdiction dependent and you should seek local accounting
> advice
> as to whether the above approaches or another methodology is
> applicable for
> the reporting arrangements you need to comply with.
> 
> 
> 
> -----
> David Cousens
> --
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