[GNC] Issues with "doubtful accounts" contra account for bad debt.

[Isabelle Knott]

Hello there! I have a question about how to account for bad debt and allowance for doubtful accounts in GNUCash.



I run a not-for-profit organization funded by members dues. We use the accrual basis for accounting, so we generate invoices for each member every month. Sometimes a member goes MIA and doesn't pay their dues for a few months. When that happens, I create a transaction that credits A/R for the amount owing, and debits a "Doubtful Accounts" asset, which sits next to A/R but is not a sub-account.



This is how my current setup looks in the accounts overview, supposing I have $1,000 owing to us, $100 of which is doubtful.



- Assets  $1,000

    - Accounts Receivable  $900

    - Doubtful Accounts  $100



If the member disappears completely we have to account for this as bad debt. To do that, I assign that first transaction as a payment on their invoices (so they can be marked as "PAID"), and then I create a split transaction crediting "Doubtful Accounts" and debiting a "Dues Forgiveness" expense account and a "Bad Debt" liability account (which tracks the uncollected sales tax.)



This way the "Doubtful Accounts" account is nominally zero, and can be easily referenced to see how much of our expected members dues are delinquent/dubious at any given time.



If instead the member returns and pays their dues, I make a transaction undoing the first transaction, bringing "Doubtful Accounts" back to zero. Their payment transaction credits A/R as usual, and it is this real payment that pays-off their invoices.



A couple of questions:



Firstly, is there a better way to do this in GNUCash? A better process? I used to un-post invoices and add a negative line item to cancel out the amount owing, but I'd like to track the amount of forgiven dues as an expense over the course of the year.



Secondly, ideally I want "Doubtful Accounts" to be a contra account against A/R. Ideally I'd like it to be a sub-account, with its account type set to "liability." That way it contributes to the sum-total of A/R but would also render as a negative number underneath in the accounts overview like so:



- Assets  $1,000

    - Accounts Receivable  $1,000

        - Doubtful Accounts  -$100



This reads a lot better to me, and I like how it appears when I generate balance sheets (I always set the "calculate subtotal" option for parent account balances.)



I did some sniffing around the mailing list and this method has been described before by David Cousens[^1]. Unfortunately, I cannot use the transactions I make from A/R to "Doubtful Accounts" as payments against the member's invoices. The "Doubtful Accounts" account doesn't appear in the account list if it's under A/R as a sub-account, and so I cannot submit the dialog box if I right-click on those transactions and hit "assign as payment." Is there a way to workaround that?



Thanks for your time!



[^1] https://www.mail-archive.com/gnucash-user@gnucash.org/msg13297.html 



Isabelle Knott

Director | Queer Computer Club Inc.