A Simple Approach To Write off Bad Debt In QuickBooks
Bad debt, also known as an uncollectible account, is typically associated with account receivables. To know why Write off Bad Debt in QuickBooks, read this article.
Often a customer might owe you money, but you know they aren’t going to pay you back. These are called bad debts, which you might better remove from QuickBooks. Moreover, for companies utilizing the accrual method of accounting, it is possible to write off the bad debts as deductions.
This blog will discuss how to write off bad debt in QuickBooks. For faster guidance, though, we advise you to call our QB Experts at TFN +1-(855)-955-1942. They will walk you through the process of eliminating bad debt journal entries in QuickBooks in real-time.
What Is QuickBooks Bad Debt?
You send your customers or clients the invoices and expect them to pay you soon. However, you know which invoices have become uncollectible after a long delay. These should be separated out as bad debt and removed. This is important for keeping your accounts receivable and net income updated.
Read this: Ways To Get Rid Of QuickBooks Error 12009
How To Write Off Bad Debt In QuickBooks Online
Writing off bad debt in QuickBooks Online is a multi-step process of reviewing invoices, creating bad debt expense accounts, creating and applying memos to invoices, and running bad debt reports. Follow the steps down below to write off the bad debt in QB Online.
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Check the Aging Accounts Receivable
First, review all the invoices with the Accounts Receivable Aging Detail report and find the ones that are bad debt.
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Open Business Overview and click on Reports
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Look for an Accounts Receivable Aging Detail report and open it.
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Now, decide the pending balances you should write off as bad debts.
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Make a Bad Debts Expense Account
If you haven’t created a bad debt expense item, you might need to create one now.
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Click on settings and choose the chart of accounts
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Now, click on New and create a new account
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Select Expense as the account type, and in the detail type, choose bad debts.
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Fill in the name as Bad debts and click on save and close.
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Make a Bad Debt Item
If you haven't created a non-inventory item for bad debt, you must make it now to balance the accounting.
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Click on settings and choose Products and Services.
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Now, click on new and choose non-inventory
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Fill in the name as Bad debts
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Choose bad debts as the Income account type
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Once done, click on save and close
Recommended to read: QuickBooks Payroll Tax Table Update
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Make a Credit Memo For the Bad Debt
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Now, click on New and choose credit memo
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In the drop-down options for Customer, choose the customer
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Choose bad debts in the section for Product/Service
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Now, enter the amount you wish to write off in the amount section
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For the message displayed, enter bad debt
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Once done, click on save and close.
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Apply Credit Memo to Invoice
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Now, click on New and choose to Receive payment under customers
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In the drop-down options for Customer, choose the customer
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Choose the invoice in the section for Outstanding Transactions
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Choose the credit memo from the Credits section
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Once done, click on save and close.
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Run Bad Debt Reports
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Click on settings, choose chart of accounts
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Now, choose Run report in the Action section.
Talk To An Expert!
The above blog should help remove the bad debt journal entry in QB. If you find an issue or have a query on how to write off bad debt in QuickBooks, feel free to call us at TFN +1-(855)-955-1942. Our ProAdvisors are always available to assist you and resolve your query.
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