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RD, Certified Public Accountant (CPA)
Category: Finance
Satisfied Customers: 8784
Experience:  MBA, CPA
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Journal entry for forgiveness of debt accounting

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What is the journal entry when a company loan is settled for an amount less than the original loan. ie the lender for gave a portion of the loan??

Is this entry in the books of the lender or in the books of the borrower?
Customer: replied 7 years ago.
In the books of the borrower. The lender forgave a portion of the loan.
Loan Payable Dr
Bank Acct Cr (Amount Paid)
Cancellation of Debt Income Cr (with the loan amount forgiven)
Customer: replied 7 years ago.

What type of Account is Cancellation of Debt Income?
Other Income.
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