In the past I have lent some money to friends and family, which I have not gotten back. I don't want to ask them for the cash, but I do want to clean up my accounts.

How would I record this in my books?

Currently I have loans to friends and family in separate asset accounts, which I call "asset.<person's full name>".


  1. I think I get the basic principle of accrual accounting, but I am not familiar with standard terminology for standard accounts.

  2. I am self-learning accounting to help me manage my personal finances, and manage my small businesses.

  • 2
    For tax purposes, or for accounting purposes?
    – keshlam
    Aug 3, 2014 at 17:19
  • 1
    Are you forgiving the debts? or just charging them off? Aug 16, 2014 at 8:40
  • 1
    Do you actually prepare a personal "Balance Sheet" / "Financial statements"? To what end? Jun 28, 2016 at 20:55
  • 1
    @Grade'Eh'Bacon the obvious end of OP seeing where she(?) stands financially.
    – RonJohn
    Jan 7, 2023 at 20:42

1 Answer 1


A simple way to account debt forgiveness of your receivables is to utilize a "Bad Debt" expense account. Take the following two examples:

  1. You loan $500 to Aaron with no interest accrued through its life.
    • Debit the Bad Debt expense account for $500.
    • Credit the Aaron receivable asset account for $500.
  2. You loan $10000 to Barbara with $300 interest accrued.
    • Debit the Bad Debt expense account for $10300.
    • Credit the Barbara receivable asset account for $10000.
    • Credit the Interest receivable asset account for $300.

If you are only forgiving a portion of the principal, another popular term used is Principal Reduction as the expense account.

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