brain dead!

shellsbook

Hello,

For some reason I'm having a total mental block on this...
A supplier has written off a debt built up by a sole-trader after the sole-trader became incorporated. They have continued to trade with each other. What would be ledger entries for that?
I feel you need to DR the supplier account to show that the money is no longer owing, but that makes it look like the business has paid it, which it hasn't.
Any clues greatly appreciated!

Thanks,

Shell

phoenixd

The cancellation/write off of a credit balance ie a liability should be recognised as 'other' income. Entries should be DR supplier CR other income. [Better check and note 1. why the contract to pay was cancelled. 2. If the debt was included in the goodwill calculation on incorporation. 3. If any asset changed hands in lieu of payment as it is strange that a supplier was prepared to write off a debt but still continued trading with the bad debtor at higher risk (ltd company!).]

shellsbook

Thanks phoenixd! I think my brain has been mashed by Christmas. Appreciate you notes to check too.
Merry Christmas!!