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Megan C
Megan C, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 16544
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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My retail store is closing. what is the general ledger entry

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My retail store is closing. what is the general ledger entry (debit and credit and description please) for an account trade payable that the store will NOT be paying back to the vendor at all.

Megan C :

Thank you for your question, and thanks for using JustAnswer.com

Megan C :

How are you today?

Megan C :

You would debit accounts payable and credit Debt Forgiveness income

Megan C :

To recognize income from the forgiveness of debt

Megan C :

If you didn't want to do that, you would debit accounts payable and credit miscellaneous income/expense

Megan C :

the explanation would be "to write off accounts payable"

Customer:

im ok with the first option of debt forgiveness, though the vendor did not actually "forgive" the debt. is that ok?

Megan C :

Yes, that's okay

Megan C :

It's still income because it's debt you aren't paying

Customer:

ok

Megan C :

Is there anything else that I can assist you with today?

Customer:

no thats it, thanks

Megan C :

You're welcome. If you would, please rate my response as "excellent" so that I may receive credit for assisting you today

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Thanks, Riccardo for your positive rating. Please come back and visit me any time you have a question that needs answered. It was a pleasure working with you today.