How to go about writing off a bad debt?
From your Chart of Accounts, choose New. You will need to set up a Bad Debts expense account.
- To open your Chart of Accounts, press CTRL+A, or from the List menu, choose Chart of Accounts
Next step will be to set up a service item that will be linked with this Bad Debt expense account.
- From the List menu > Item list, choose New
- Call it Bad Debts and leave the amount as zero as you will have the flexibility of putting any amount you choose in
- Choose the Bad Debts expense account that you just created
Assume there is an invoice currently outstanding and waiting for settlement.
- Produce a Refund and adjustments
- Apply the same customer and choose the Bad Debts item
Note: The tax code on the refund and adjustment must match the on the invoice for you BAS to be correct
- Click Save and Close. This customer will now have an outstanding credit waiting to be applied, for this particular customer
- From the Customers Navigator, choose Receive Payments
- Choose the customer with the existing credit to apply to the invoice waiting for payment
- Choose the particular invoice and press the Set Credits button, and apply the amount of that credit and press Done
- Make sure that the receive payments screen has all the information, amount of payment etc…
You have now accounted for a Bad Debt in Quickbooks. To check that it has gone through you can check it against a Profit and Loss report or Tax Summary report.