Q: If the company wrote off a note due from shareholder, what is the accounting entry to record the reduction of the note? If it is either a repayment from shareholder or a distribution to shareholder, the accounting entry will be on the balance sheet only, correct?
A: The company would post a credit entry to "Due from Shareholder" and an offsetting debit entry to "Other Expense" or something similar. The bottom line is that the company must report the write-off as an expense on its income statement.
Below are a few accounting entries based on the type of event along with a blog entry on the topic:
Loan Repayment
dr. Cash (b/s)
cr. Due from Shareholders (b/s)
Loan Write-off
dr. "Other Expense" (i/s)
cr. Due from Shareholders (b/s)
Distribution
dr. Distributions (b/s - retained earnings)
cr. Cash (b/s)
Conversion of Loan to Distribution
dr. Distributions (b/s - retained earnings)
cr. Due from Shareholders (b/s)
This Q&A entry may help as well:
When should we consider the cash flow of loans to stockholders? Should we do so at the time the loan is given or at the time it is converted to a distribution to the owner?
Course overview: Financial Statement Structure and Composition