How To Record Debts When Cash Is Paid Below The Book Value?

The debtor pays the debt below the debt book value, which is equivalent to the creditor giving a donation to the debtor. Therefore, when the debtor pays the debt in cash, the difference between the book value of the debt and the cash paid shall be recognized as capital accumulation for the debtor.

Example: in February 10, 2001, Shen Guang company sold a batch of materials to Hongxing company, excluding tax price of 100000 yuan, and the value-added tax rate was 17%.

In March 20th of that year, Hongxing company had difficulty in financing, and could not repay its debts according to the contract stipulations. Through the agreement between the two sides, Shenzhen and Guangzhou agreed to reduce the debt of Red Star Company by 20000 yuan, and the balance should be paid in cash immediately.

Shen Guang did not prepare bad debts for debt.

The Red Star Company: 1, calculate the difference between the debt restructuring date, the book value of the restructured debt and the cash payable: 117000-97000=20000 (yuan), 117000 (2) accounting treatment: Loans: accounts payable 117000 Loans: bank deposits, 97000 capital reserves, other capital reserves