GMS RLSS Online Help
  • Home
  • Contents
  • Index
  • Search

WELCOME TO GMS RLSS ONLINE HELP

The help you need at  your fingertips.
You are here: Loan Master > Special Situations > Write Offs (Bad Debts)

WRITE OFFS (BAD DEBTS)

There are several events that occur when a loan has become uncollectible.  These events may occur in any order.  They may happen all at once or over several months.  The first event is usually legal action taken with the assistance of an attorney.  In GMS-RLSS, you will usually change the loan status to Write-off at this time.  You should also take some time at this point to review the terms of the loan as reflected in the Loan Master file.  Should any of the terms of the loan be changed at this time?  For example, will interest stop accruing?  If so, change the interest rate to 0.0%.

When ready to bring the loan balance to zero, follow these steps:
  1. From the Reports menu, print a Loan Master file report including both Loan Master File and Loan Activity Report to help determine what entries need to be made.
  2. If there is accrued interest outstanding, enter an adjusting entry with activity date as the date the loan is being written off and the activity total as zero.  Enter the accrued interest to be written off under both “current interest” and “accrued interest” as a negative number.  The net affect on “principal” should be zero.
  3. Again using adjustments, enter a negative disbursement of the amount to be written off.  If this is the loan balance, the result should be a new balance of zero.
  4. Go to Loan Master, change the Status to Write-off, using the same Activity Date used in step 3 above as the Write-off Date.

The next major event is writing the loan off in accounting records.  You will need to adjust the balance of either Notes Receivable or Loans Disbursed, depending on the method used to account for Revolving Loan Funds.  Credit either Loans Disbursed or Notes Receivable, and debit either Loans Written Off (an expense account) or Allowance for Bad Debts (a liability account).
If using the Journal Entry created by GMS-RLSS, it will need to be edited before posting to the accounting system.  The Journal Entry will post the amount of the loan written off as a debit to cash, which will need to be changed to a debit to either Loans Written Off or Allowance for Bad Debts.
​
If there is subsequent recovery of some of the amount written off, use Loan Activity to disburse the amount being recovered.  Then use Loan Activity again to post the recovered funds as a repayment.
Picture
Copyright © 2019 GRANTS MANAGEMENT SYSTEMS, INC.
  • Home
  • Contents
  • Index
  • Search