Hi, Chris,
On 02/09/2014 03:05 AM, Chris Travers wrote:
On Sat, Feb 8, 2014 at 10:08 PM, John Locke <m...@freelock.com
<mailto:m...@freelock.com>> wrote:
Hi,
For quite some time I've been handling bad debts by receiving cash
into
a Bad Debts expense account. This works fine for accrual based
reporting, but we still use cash reporting for the IRS, and doing cash
flow projections.
To be honest, some of the decisions here may be beyond my accounting
expertise. You may want to run some of them by your accountant.
If I were making the decision free of any authority and just based on
accounting principles, I would probably make the bad debts account a
contra revenue account. There are a couple reasons for this, but
basically bad debt effectively might as well never have been earned.
It isn't money spent or revenue expended, and therefore typically
taxes that tax gross income (like B&O tax in Washington State) make
bad debt deductible while expenses typically would not be.
Yes, this is exactly what I've done -- reported the full revenue, and
then there's a field for deducting bad debt. I've been doing that on an
accrual basis, mainly because that's what I have had available in LSMB...
That sounds like a good approach.
If you had to, I suppose you could list it as an equity account, but
then it will appear on your balance sheet.
A better approach might be to modify the cash_impact view and cash
basis report to specifically exclude contra-income entries in 1.4. I
don't see a better way to do this for 1.3 though.
Well, there's not any cash reporting in 1.3, so that's not an issue ;-)
That sounds like an appropriate solution.
Cheers,
John Locke
http://www.freelock.com
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