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VernMitchell
December 31, 2022
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How to write off a an uncollectable loan

  • December 31, 2022
  • 1 reply
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I originated a loan to a client and it will never be paid back. How do I remove it from my balance sheet? There are lots of articles on how to write off bad debt when it comes to invoices but I can't find anything on loans. 

Best answer by Rainflurry

@VernMitchell 

 

A bad debt expense applies to any business bad debt that has become totally worthless, whether it is a note receivable from a loan or accounts receivable from a sale.  You account for it the same way.  To remove the loan from your balance sheet, create a journal entry: debit bad debt expense and credit the note receivable for the uncollectible amount.  You should now show the expense on your P&L and the note receivable removed from your balance sheet.

1 reply

Rainflurry
RainflurryAnswer
December 31, 2022

@VernMitchell 

 

A bad debt expense applies to any business bad debt that has become totally worthless, whether it is a note receivable from a loan or accounts receivable from a sale.  You account for it the same way.  To remove the loan from your balance sheet, create a journal entry: debit bad debt expense and credit the note receivable for the uncollectible amount.  You should now show the expense on your P&L and the note receivable removed from your balance sheet.

    A
    AileneA
    January 1, 2023

    Hello, VernMitchell. 

     

    I agree with Rainflurry. You'll have to create a Journal entry to remove the loan from your balance sheet. I'll show you how to create a J.E. in QuickBooks.  

     

    Here's how:
     

    1. Click the Company menu and choose Make General Journal Entries.
    2. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
    3. Tap Save & Close.

    However, I still recommend reaching out to your accountant to guide you in creating JE. To make sure your books are still intact and accurate. 

     

    For more information, on how to record journal entries click this article: Create a journal entry in QuickBooks Desktop. 

     

    Let me know if you need further assistance with QuickBooks. We're always right here ready to help you anytime you need us. Have a great day!

      BigRedConsulting
      BigRedConsulting
      January 1, 2023

      @AileneA  RE: I'll show you how to create a J.E. in QuickBooks. 

       

      Piling on after @Rainflurry isn't helpful and doesn't add any value. Also, the OP didn't ask how to enter a Journal Entry.

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