[spirie]

We have a forgivable loan that decreases $6400 each year until finished. What is the entry to decrease the amount each year? I know I would decrease the liability but what other account would be used?

[ArcSine]

The credit side of that entry depends on the nature and terms of the forgiveness arrangement. If, say, you're selling merchandise to the creditor every year but knocking $6,400 off the invoice, then the credit would be to Sales. Similar answer if your company is performing services for the creditor at some reduced rate.

If the creditor happens to be a parent company, and they've decided to reclassify what was intended to be a short-term loan into permanent capital instead, then you'd probably be crediting some equity account. But again, the credit should reflect the nature of the underlying arrangement.