We had a what we thought was a business credit card. But when one of the owners filed Bankruptcy the amount owed to the credit card company was included in his bankruptcy. So now the company does not owe this balance. How can I remove this from QB correctly?
How did you write off the other debts in the bankruptcy?
The "payment" to the CC should be applied to the same account or written down with the same type of journal entry. And if the CC isn't closed, it should be.
It depends on the entity type of the business.
"the amount owed to the credit card company was included in his bankruptcy." does not make sense.
No other debts were written off. The business did not go bankrupt. It is an LLC partnership, and one of the partner went bankrupt and because that credit card showed on his credit report he had to include it in the bankruptcy hearings.
The business is an LLC Partnership.
The debt to that credit card showed up on his credit report so he was required to include it in the bankruptcy.
a personal credit card should not be in the books of the partnership.
any business expenses paid for with a personal credit card would be offset to the partner's equity account: contributions
any payment made by the partnership to the personal credit card would be offset to the partner's equity account: draws
Given that the partner is bankrupt I guess it does not matter. I assume the person is no longer a partner.
One option is to write off the balance to the partner's equity account, and then write off the balance in the the bankrupt partner's equity account to the other partners, but I would confirm this with a CPA. There are tax implications
Thanks for your help. It wasn't a person credit card. it was a small business credit card. But to get one of those you have to give your personal info, SSN#, etc. So when the partner filed for bankruptcy, this debt showed on his credit report. And to go through bankruptcy the attorney said he had to include all debt. So it got included in the bankruptcy. Maybe it shouldn't have been? But it was and now the debt is part of his settlement he is paying on his own. Confusing situation I realize.
You can make one final Credit Card Credit/Return, and post it as Equity for that member. This essentially removes it from the business as if that person paid it off, personally. Your tax preparer needs to deal with the ramifications of that confusion for purposes of the 1065 and K-1. If this happened in 2018, you only have 3 weeks to address it.
Your tax preparer needs to deal with the ramifications of that confusion for purposes of the 1065 and K-1. No one on the internet knows anything about your entity or the taxes.