![]() ![]() XYZ will accept $400 a month for 3 years to pay off the total debt of $12,000 interest free. The bills in accounts payable must now be converted to a loan. The opposite of the above is that XYZ still wants their money in full but they’ve opted for a payment plan. To record this transaction you:ġ.) Create a credit in the amount of $12,000 to XYXĢ.) The account on the credit you hit will be an “Other Income” account that I would call “Gain From Relief of Debt” … as the bill has technically ‘been paid’ with an income other than your businesses main form of income we book it as ‘other income’ģ.) Enter your accounts payable screen and set the $12,000 credit one bill at a timeĤ.) Pay the bills you’ve selected once the credit has been applied to each billĥ.) You now have on your books a $12,000 income for settling your debt Because XYZ has told you that those twelve are no longer due you've now just technically generated a new source of income. Well, how do I clear out my accounts payable in QuickBooks then to show the twelve bills as paid? Simple. The absolute best-case scenario for your business is that XYZ tells your company that those 12 bills for $12,000 on your books do not need to be paid. You have a phone call with XYZ and an agreement is reached… ![]() A year has passed and those 12 bills still sitting in your Accounts Payable continue to show past due. ABC knows that its cash flow just doesn’t warrant making a $12,000 payment to XYZ for the advertising bills now past due. Your company, ABC, has unfortunately been unable to pay back XYZ for a $1,000 monthly advertising bill that has now accumulated to $12,000 for the year. ![]() I hope for your sake though it never gets as bad as Han Solo. The debt may now become a loan, which will require you to record a settlement of debt in QuickBooks to help keep your books balanced. We all fall behind on our bills at one point or another in our lives but others may go a little further then that just like Han Solo. Forgoing payment to a particular vendor for an extended period of time may turn into insurmountable debt. ![]()
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