Last Updated on December 7, 2020 by Editorial Staff
Sometimes the customers owe us money but we can’t collect it, and they have a debt with us. It is a very common problem for all types of businesses, and in that situation, we need to write it off as a bad debt. Here we are with the blog, regarding this topic to write off bad debt in QuickBooks.
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Before starting the blog, we think it will be good to give a little overview of bad debt, so that the new users, or the readers can understand this topic, very easily.
What is Bad Debt
When your company sells anything on credit, then the company records it in its accounting books as account receivable. And this account receivable is highly chance to didn’t get money from the customer. By the way, this account receivable comes under current assets. So it is necessary to keep a record of it while creating a balance sheet.
Overall bad debts are a term when you sell goods on credit, but the customer did not pay the amount that he has to pay to you. It is known as bad debts for the company or uncollectible expenses. So let’s see how to write off bad debt in both QuickBooks Online and QuickBooks Desktop;
Procedure to Write Off Bad Debt in QuickBooks Online & Desktop
Here we have provided two procedure to write off bad debt for QuickBooks Online, and QuickBooks Desktop. Follow the procedures, according to your business type.
How To Write Off Bad Debt In QuickBooks Online
Write off bad debt in QuickBooks Online, by following the below procedure:
Step 1: Check the Aging Accounts Receivable
In the first step, check the aging accounts receivable:
- Visit to the ‘Reports’ menu, and open the ‘Accounts Receivable Aging Detail’ report.
- And check which outstanding accounts receivables should be written off.
Step 2: Create a Bad Debts Expenses Account
Now create bad debts expenses account, by following the below steps:
- Visit for the ‘Settings’ option, and select the ‘Chart of Accounts’ option.
- Go to the Top-right, and select the ‘New’ option to create a new account.
- Select the ‘Expenses’ option from the ‘Account Type’.
- And choose the ‘Bad Debts’ option from the ‘Detail Type’ drop-down.
- Enter the ‘Bad Details’, in the ‘Name’ field.
- At the end, select the ‘Save and Close’ option.
Step 3: Create a Bad Debt Item
In the third step, create a bad debt item, through the below steps:
- Go to the ‘Settings’ tab, and select the ‘Products and Services’ option from the list.
- From the top-right corner, select the ‘New’ option, and then click the ‘Non-inventory’ option.
- Type, ‘Bad Debts’ in the ‘name’ field.
- And select the ”Bad Debts’ option from the ‘Income Account’ drop-down.
- Save, and close all the things.
Step 4: Create a Credit Memo for the Bad Debt
This is the procedure to create memo for the bad debt;
- Click on the ‘+New’ option, and select the ‘Credit Memo’ or ‘Give Credit’ option.
- Choose the customer name from the ‘Customer’ drop-down.
- From the ‘Product/Service’ section, select the ‘Bad Debts’ option.
- Enter the amount that you want to write off, in the ‘Amount’ column.
- Enter ‘Bad debts’, in the ‘Message Displayed on Statement’ box.
- Save all things, and close it.
Step 5: Apply the Credit Memo to the Invoice
After creating a credit memo for the bad debt, apply the credit memo to the invoice;
- Go for the ‘+New’ option, and to the ‘Customers’ tab.
- Choose the ‘Receive payment’ or the ‘Receive Invoice Payment’ option from the ‘Customer’ section.
- Now from the ‘Customers’ drop-down, select the customer’s name.
- Select the invoice, from the ‘Outstanding Transactions’.
- Select the credit memo, from the ‘Credits’ section.
- Save it, and close it.
Step 6: Run a Bad Debts Report
Follow the bellow procedure to run the bad debts report:
- From the ‘Settings’ tab, select the ‘Chart of Accounts’ option.
- And then in the ‘Action’ column of the bad debts account, choose the ‘Run Report’ option.
How To Write Off Bad Debt In QuickBooks Desktop
Write off bad debt in QuickBooks Desktop by following the below procedure:
Step 1: Add Expenses Account to Track the Bad Debt
Writing off bad debt in QuickBooks Desktop can be complete in just 2 steps. And here is the first step, just follow it:
- First, visit the ‘Lists’ menu, and select the ‘Chart of Accounts’ from the list.
- And then, choose the ‘New’ option from the ‘Account’ menu.
- Go to ‘Expense’, and click the ‘Continue’ option.
- Enter the ‘Account Name’, and click the ‘Save and Close’ option.
After, complete all these, go to the 2nd step.
Step 2: Close the Unpaid Invoices
Follow the procedure to close the unpaid invoices:
- First of all, select the ‘Receive payments’ option from the ‘Customers’ menu.
- Now in the ‘Received From’ field, enter the name of the customer.
- Enter $0.00, for the ‘Payment Amount’.
- Choose the ‘Discounts and Credits’ option.
- Enter the amount you’d like to write off in the ‘Amount of Discount’ field.
- Select the account, that you added in the first step, and click the ‘Done’ option.
- Lastly, click on the ‘Save and Close’ option.
The Final Words
As you have seen above how to write off bad debt in QuickBooks. Hope you like it, and now you are able to write off bad debts in QuickBooks. Further, if you have any issues to write off bad debt then, you can get our Accountwizy ProAdvisor support for an instant solution.