If someone wants to forgive part of a loan (note) and convert it to a donation, how should I record this transaction?
Thanks @MadelynC . The issue I'm having is that the Journal entry doesn't allow me to link the transaction to a specific individual. For example, I have two lenders:
Lender A loaned $5000
Lender B loaned $6000
Total Notes Payable is $11,000.
Lender A decides to convert $3,000 leaving a balance of $2000 ($5000 - $3000).
I issue a sales receipt for Lender A in the amount of $3,000 against an income account.
When I create a journal entry to account for this adjustment between the income and notes account, I can't specify the specific loan that I need to credit - the adjustment is at the category level (Notes Payable) and not the individual and/or business. Notes Payable will have a balance owed of $8,000 ($11,000 - $3,000) but I don't have a way to know the adjustment against a specific lender.
Is there a way to capture the loan adjustment at the Lender level (Lender A)?
Allow me to share some information when creating a Journal Entry about the loan transaction in QuickBooks Online.
When converting the loan note to a donation, there's no need to create a sales receipt as it will record another deposit separately. You only need to create a Journal entry in transferring the liability balance to an income account. I'd also recommend consulting your accountant about this matter. They will assess the transaction and give advice on what is the best thing to do.
Regarding creating a Journal Entry, here's how:
Go to the + New and select Journal Entry.
Enter the details below:
Liability Account= Debit
Income Account = Credit
Choose the specific Lender under the Name column.
Select Save and close.
Also, the option to track loan adjustment at a lender level is by creating a separate liability account for Lender A and Lender B.
You can track the transactions happening in your Loan account by running a Balance Sheet report or Account List report. I've added an article in case you've encountered an error when running a balance sheet in the future: FAQ: Basic troubleshooting for balance sheets.
I'll be here if you have other questions. You can always tag my name in the comment section. Have a wonderful day.