Listen to this articleAs we are all aware that writing bad debt in QuickBooks can help prevent discrepancies in business accounting. If you want to keep your records accurate and record bad debts in QuickBooks application, then this post is for you. When your QuickBooks invoices become uncollectible, then you need to record them as a bad debt and write them off. In this post, we will discuss the procedure for writing off bad debt in QuickBooks in easy steps.
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Table of Contents
How to Setup an Item as Bad Debt in QuickBooks Online?
Writing off bad debt in QuickBooks requires you to set up an item as bad debt in QuickBooks in the first place. Follow the below-given steps to get it done:
- First of all, you need to select the account option available on the left side of the screen.
- Next, click Chart of Accounts and then further click New in the upper right corner.
- After that, convert the account type to income and rename the account as Bad Debt.
- Select Save and Close once you are done.
- Moving ahead, click on the Gear icon and then further click on Products and Services from under the Lists column.
- Click on New>Service and then name the service as Bad Debt.
- Change the account type from Income to Bad Debt.
What Are the Steps That Are Used in Writing Off Bad Debt in QuickBooks?
Sometimes, you may not be able to recover money from the borrowers when they becomes bankrupt. It is possible that the debtor is unable to pay the debt for some other reasons. This situation is known as bad debt in QuickBooks, and you need writing off bad debt in QuickBooks to prevent any discrepancies in your business accounting. Below are the steps that can help you get the task accomplished:
Examine the A/R Report
- You need to click on Reports from the panel to the left of QuickBooks for writing off bad debt in QuickBooks.
- Next, you need to look for the Account Receivable report from the top search bar.
- Click on the Accounts Receivable Aging Detail Report, and it will help you to view the outstanding receivable account.
Create a Bad Debt Account
- Click on the Gear icon and select Chart of Account.
- Next, click on CREATE NEW ACCOUNT and press the Expenses button from there.
- After that, clickthe Detail Type drop-down menu where you can choose all the bad debt. Name it as Bad Debt page and click on Save.
- In the end, select Close to finish the task.
Set Up the Service or Product for Bad Debt Items
- Proceeding further for writing bad debt in QuickBooks, click on the Gear icon and then choose Products and Services from there.
- Next, you need to click New Product and then further click Non-Inventory Option.
- In the blank space, type Bad Debt and then accept the Bad Debt expenditure. Uncheck the box for “Is Taxable” and then click Close.
Set Up Credit Memo
Setting up a credit memo is important for writing off bad debt in QuickBooks.
- On your QuickBooks dashboard, click on the plus icon and then further click on Credit Memo.
- Next, from the drop-down menu, choose the customer and then the item that you created for bad debt.
- In the end, enter the number of unpaid invoices and then hit on CLOSE. It will save the changes you have made.
Implement the Credit Memo
- Click on Receive Payment from Customers by clicking Plus icon.
- Next, you need to choose the Customer.
- After that, select the invoice you would like to write off.
- You can get it done from the Outstanding Transactions section.
- Now from under the Credits section, you would find the option to select a Credit Memo.
- Confirm that the amount is $0.00 in that region.
- Click on SAVE and CLOSE to finish the procedure.
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Get Help from QuickBooks Experts!
The steps described in this post can help you in writing off bad debt in the QuickBooks application. If you need further assistance, dial QuickBooks Error Support Experts at 1-(855)-856-0042. In no time, our QB experts will assist you in writing off bad debt in QuickBooks in simple steps.
