HOW TO WRITE OFF BAD DEBT IN QUICKBOOKS

A bad debt can be written off using either the provision method or the direct write off method. The initial approach tends to delay the recognition of the bad debt expense. It’s necessary to write off Bad Debt in QuickBooks when the related customer invoice is considered to be uncollectible. Otherwise, the organization will carry an inordinately high accounts receivable balance that overstates the number of outstanding customer invoices which are eventually converted into cash.

Ways to account for a Bad Debt

Direct write off method: The supplier can charge the amount of an invoice to the bad debt expense account when it’s certain that the invoice is not paid. The periodical entry is a debit to the bad debt expense account and credits to the receivable account. It’s also essential to reverse the sales task that was charged on the original invoice.

Provision method:The seller can change the quantity of the invoice to the allowance for doubtful accounts. The periodical entry is really a debit to the allowance for doubtful accounts and a credit to the accounts receivable account.

QUICKBOOKS

Easy methods to Write Off Bad Debt in QuickBooks

As it so happens from time to time, you struck a contract with a customer and poured your work for them. However, sometimes for some reason, they are refusing to pay you, whether it may be due to disagreement about the project or lack of funds. If you still want to learn how to Write Off Bad Debt in QuickBooks Online. Follow the below steps and you can write off your bad debts very easily.

Step 1: Review the aging report for the Accounts Receivable

This is really a very first thing that you need to deal before Write Off Bad Debt in QuickBooks Online. Carefully review your Accounts Receivable Aging Detail Report. Here’s how you will find it:

  • To open the Reports section, Use the left side menu.
  • Open the Search bar.
  • Enter the Accounts Receivable Aging.
  • Choose the Accounts Receivable Aging Detail Report which displays all your outstanding accounts receivable.

Step 2: Create a new account fully for Bad debts

You will have to create an expense account.

To start the process:

  • Go through the Gear icon from the Toolbar.
  • Open Your Organization.
  • Choose “Chart of Accounts.”
  • Hit on New.
  • From the Accounts notification, select Account Type.
  • From the drop-down menu, Choose Expenses.
  • You must see a drop-down menu for Detail type.
  •  Hit on Bad Debts.
  • Type Bad Debts into the Name field.
  • Click on Save and Close.

Step 3: Create a product item or perhaps a service item

  • Go through the Gear icon from the Toolbar above.
  • Click on Lists.
  • Open the Services list and Products.
  • Click New.
  • From the data that opens, choose the Non-Inventory option.
  • Enter Bad Debts to the Name field.
  • Get back to the Income Account field, and choose the newly created account.
  • Clear the checkbox for ‘Is taxable’.
  • Click on the Save and Close.
Easy methods to Write Off Bad Debt in QuickBooks

Step 4: Draft a bank card memo

  • Go through the Plus icon from the Toolbar.
  • From the drop-down list, Choose Customer.
  • Choose the newly created bad debts to account from the Services or Products field.
  • Enter the amount.
  • Enter Bad Debt in the Memo field.
  • Click “Save and Close”.

Step 5: Apply the credit memo

  • Go through the Plus icon from the Toolbar box.
  • From the Customers tab, have a click on the “Receive Payment”.
  • From the list, choose the customer.
  • Utilize the Outstanding Transactions section to choose the invoices you wish to write off.
  • From the underneath Credits section, Choose the newly created memo.
  • Click “Save and Close”.

Step 6: Run a report for the bad debts

  • Go through the Gear icon from the Toolbar above.
  • Open your Company.
  • Choose “Chart of Accounts”.
  • Locate the account designed for bad debts expenses.
  • Choose “Action”.
  • From the drop-down menu, Click on Run Reports.

Hope that helped!

The above-given steps guide how to Write Off Bad Debt in QuickBooks are helpful. If you were unable to follow any of the steps or found something too complex, feel free to contact QuickBooks professionals at any time. Our experts are available 24/7 or 365 days.