If a company has a loan of say 3000 and 1500 of it is written off by the person who loaned it how do I do the double sided entry I know I credit the loan account but where do I put the other side
Check with your local tax authority as to the allowable practice.
Depending on the original loan’s purpose, it may be required that the forgiven part be shown as income, if not, then transfer it to Equity as it would be deemed as a capital contribution.
Thanks I dont suppose this happens very often Ha Ha I mean who forgives a loan
More often then you realise, its better to get 50% and then get none if that’s the prospect.
True I suspect that is the case here.
If the business for which the accounts are being kept owes the loan, and the lender forgives part of the loan, there is no credit to the loan liability account; there is a debit. The income or equity accounts @Brucanna mentioned would be debited.
Thanks for your input Tut I sorted it