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General Accounting Discussions: 1099-C Cancellation of Debt

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    • CommentAuthorAS-inc
    • CommentTimeFeb 4th 2010
     
    Cancellation of Debt (COD), in most cases requires debt, that was expensed by prior purchases such as Cost of Goods Sold, to be converted back to Income.

    A General Jounal entry to convert a COD liability to Income can adjust this on the books; however, it creates a negative value (= to the COD liability) in the Liability portion of the Balance Sheet.

    My quesiton! Should an entry or entries other than Journaling COD Liability to Income be made? If not, how should the balance sheet be adjusted so that Assets and Liabilites are the same?

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