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Our pastor has a flexible spending account. Money is deducted out of each pay (twice monthly) into a liability account labeled fsa withheld. I credit the liability account thru payroll and when I disperse fsa funds back to the pastor I debit the liability account. I think all this is correct but my question is as follows. My accountant says any unused funds at the end of the year or at the end of the grace period is forfieted. I have a balance in the liability fsa account of lets say $500.00. How do I show this forfieture and get this money from the liability account zeroed and back in the general fund from which it came???
Thanks in advance for your help and advice my brain hurts, Todd

One way you could do this is create a miscellaneous income account called "Forfeiture of FSA". Debit the liability account and then credit the forfeiture income account to clear the $500 unused balance.