Easy Guide to Write Off Bad Debt in QuickBooks

Write off bad debt in QuickBooks Online

QuickBooks is an application that helps manage books of accounts for businesses around the world. The application developer has kept all the possibilities that can arise with your business and provided a feature to register it. Bad debts are a part of business, and luckily there is an option to write off bad debt in QuickBooks. It is very easy to follow.

For those who don’t know, bad debt is an expense that arises when a customer’s payback (after credit has been granted) is no longer considered collectible. In other words, bad debt is a receivable that cannot be recovered. Any firm that extends credit to its customers must account for the danger of bad debt, as your customer’s circumstances may change, and they will be unable to make the agreed-upon payment. It is important to write off bad debt in Account Receivable to know your books’ actual position. 

QuickBooks Online and QuickBooks Desktop have two different ways to register Bad debts. In case you find it difficult to follow the mentioned steps, you can always reach out to our experts at our Helpline Number +1(855)-955-1942.

QuickBooks Online is based on cloud technology that can help you store data and keep a record of it. You can write off debt in QuickBooks Online following these steps- 

Step 1- Examine your Aging Account Receivable

Using the Accounts Receivable Aging Detail report, look over any other invoices or receivables that should be considered bad debt.

  • Click on the Reports menu
  • Look for Accounts Receivable Aging Detail report and open it
  • Examine which accounts receivables should be written off

Step 2- Bad Debt Expense Account should be created

In case you don’t already have one, create a bad debt expense account in your books- 

  • Select Chart of Accounts from the Settings menu.
  • Go on the upper right corner and Click on New in order to create a new account
  • Now Go to Account Type and choose Expenses
  • Select Bad Debts from the Detail Type dropdown
  • Enter Bad debts in Name field
  • Choose Save and close

Step 3- Generate a Bad Debt Item

Create a non-inventory item as a placeholder for the bad debt if you haven’t already. This isn’t an actual item, it’s merely to keep the books straight.

  • Select Products and Services from the Settings menu.
  • Select New from the upper right, then Non-inventory.
  • Enter Bad debts in the Name field.
  • Select Bad debts from the Income account dropdown menu.
  • Choose Save and Close

Step 4- Create a Credit Memo for the Bad Debt

  • Select +New
  • Choose Credit memo
  • Choose customer from the customer dropdown menu
  • Select Bad debts in the Product/Service section
  • Enter the amount you wish to write off in the Amount Column
  • Enter Bad Debt in the Message displaced on the statement box
  • Chose Save and Close

Step 5- Apply a Credit Memo to the Invoice 

  • Select +New
  • Select Receive Payment under the customer section.
  • Choose appropriate customers from the Customer Dropdown menu
  • Select the invoice from the Outstanding Transactions section
  • Select Credit memo from the Credits section
  • Select Save and Close

Under the Bad Debts expenditure category, the uncollectible receivable now displays on your Profit and Loss report.

Step 6- Run a Bad Debt Report

You can now look at all the things you have marked as bad debts by running an Account QuickReport. In order to do so- 

  • Tap on settings
  • Choose Charts of Accounts
  • Now Select Action column of the bad debts account, choose Run report

Note- By adding a comment to their name, you may distinguish a bad-debt entity from your other customers:

  • Customers can be found under the Sales menu.
  • Choose customer’s name
  • Select Edit from the upper right
  • After the customer’s name, type Bad Debt or No Credit in the Display Name as a field.
  • Choose save.

QuickBooks desktop is an application that helps you store data on your computer system. Follow these steps in order to clear bad debts in QuickBooks Desktop- 

Tip: With the Accounts Receivable Aging Detail report, you can keep track of your clients open balances.

Step 1: Add an Expense Account in order to track Bad Debts

  • Select Chart of Account from the Lists menu
  • Select New from the Account menu
  • Select Expense and then Continue
  • Enter an Account name such as Bad Debts
  • Tap on Save and Close

Step 2- Close Down the Unpaid Invoices

  • Select Receive Payments from the Customer menu
  • In the Received From field, type the customer’s name.
  • In Payments Amount type $0.00
  • Choose Discounts and Credits
  • Enter the amount you’d like to write off in the Amount of Discount field
  • Select the Account you added in step 1 for Discount Account and Click Done
  • Choose Save and Close

So now we hope you know what to do with the bad debt account in QuickBooks. Your business books need to show the actual position of your business, and thus it is very important to clear off bad debts. QuickBooks understand the need of every business and thus offers you a variety of instruments to manage it more efficiently. If you own a business, you should definitely give it a try. If you still have any query related to QuickBooks Bad Debt, get in touch with our QuickBooks professionals by placing a call on QuickBooks Data Service Solutions Helpline Number +1(855)-955-1942.

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