A/P debits when the supplier goes out of business

Contents - Index - Previous - Next

A/P Debits When the Vendor Goes Out of Business

If you have a debit invoice for a supplier in accounts payable and the supplier goes out of business, you may wish to write off the invoice. Input an invoice into accounts payable for a credit amount in order to bring the amount due to the supplier to zero. Depending on how you wish to write off the credit, post the invoice to either a contingent liability account or to a discounts allowed account. (The contingent liability is used to show the amount on the financial statement as a contingent liability for the time period of the statute of limitations.) Once the credit is entered, go into the "Select to Pay" Module step on the A/P Module. Select the supplier and the invoices you wish to tie together using the selection process. After the selection is made, run the report Module step CHECKS. The system will not write a zero check, but the invoices will go through the process necessary to remove them from the Aging.
The results of this process should be documented.
We strongly recommend that you consult with your accountant or CPA for the preferred method of handling this transaction. Some transactions may have potential tax and/or legal ramifications that should be discussed with your advisors.