Writing off an invoice?

purplepixi

I have a customer who is self employed not ltd - I also am self employed. The last invoice I sent her was for just over £1000. I'm aware she is struggling at her retail shop, as it's not making the sales that it did last year. And I'm aware she has built up a lot of personal debt in buying stock etc. She has paid half the invoice. Although the due balance isn't for another couple of days. In the past though, she has been over the due date by a month. OK, so I have in my studio a lot of fabric that she owns. I was going to suggest that if she can't pay the invoice then I'll take the fabric in lieu of payment. 

If she agrees, how do I record this. Do I write it off as bad debt, or do I class it as paid?

Jeremy535897

Treat the transaction as a receipt of the outstanding bill, and a purchase of new stock, assuming that the fabric will be part of your business. If it won't be, treat it as drawings. If the fabric is not worth as much as the outstanding balance, you would reduce the amount treated as a receipt, and write off the balance as a discount.