What do I do if a loan received, later becomes a gift?
On occasion, someone may offer to 'loan' money to your organisation, perhaps for the significant capital project you are undertaking. If you create accounts on an accruals basis, then this should be accounted for within the Loans screen.
This help guide article covers the steps needed if the supporter who loaned the money, later chooses to write off this debt by 'gifting' the remaining value of the loan to your organisation.
Note: if you create accounts on a receipts and payments basis, this article isn't relevant for you, and instead you should simply reflect the reduction in loan amount owing when you prepare your next
Steps to record a loan being written-off
You will need to add two corresponding transactions to account for this virtual transaction that has taken place.
1. Within the Bank Reconciliation screen, click 'upload transactions' (to any current account) and select the 'Upload Transactions Manually' link at the bottom of the popup.
2. Manually add two transactions on the date you wish this adjustment to be reflected in your accounts (typically the date that the supporter informed you they want to gift the value of the loan and write off the debt).
In an example where the original loan was for £5,000, and the full balance is outstanding, please do the following:
- Transaction 1: £5,000 in the Paid In column (income)
- Transaction 2: £5,000 in the Paid Out column (expenditure)
(The net result of which is no change to your bank statement balance).
3. Once you have added these transactions, you will need to match them. Match the £5,000 paid out as a 'loan repayment', and the £5,000 paid in as a Named Donation, to reflect what indeed has happened.