Need to forgive a loan

Question

City Library Trustees loaned the Library Foundation $100,000. After a number of years of payments the loan balance is down to $46,000. The Trustees have now forgiven the remainder of the loan. How do I enter this to clear the loan without the transaction looking like either a huge influx of income (the money is already in the account) or a payment that makes it look like the loan total has increased?

[Deleted User] · Answer

I think the forgiven loan amount should be considered income.  The foundation essentially received a "gift" from the trustees.  On Quicken, there will be two offsetting entries:* A loan paydown of 46,000.00 - a loan payoff.  In the memo put something like "Loan Forgiven".
* The offsetting entry would be an income category that would best describe the situation.  Maybe something like "Loan Forgiven", or anything appropriate.

These two entries would offset each other and net to zero and since a separate income category was created for this purpose, there would be no big influx of actual income.  The increase in income can be explained by the amount of the forgiven loan.

This method would also create an audit trail for the forgiven loan.  The forgiven loan amount should also match the amounts that you would show on the balance statement, and net income report for the foundation.

Sherlock · Answer

I suggest you open the loan account, press Ctrl + Shift + N, select Update Balance, set the balance to 0 and the date the loan was forgiven, and select OK.

NotACPA · Answer

In the loan account input a transaction for the remaining balance and use the name of the  loan account  itself, enclosed in square brackets as the category.  E.G. [loan account name]The amount should be input in the same column Decrease column as all of the  other principal reductions.