how to write off bad debt in quickbooks

writing off bad debts in QuickBooks

Writing off Bad Debts in QuickBooks is something that needs to be done, so as to balance the profit and loss reports of any business.

Obviously, a bad debt is known as the money given to an individual of which the company or business owner was unable to recover from the debtor.

The company was unable to recover the money from the debtor just in case he/she has gone bankrupt or was unable to pay the debt.

Hence, it becomes a bad debt.

This usually affects the transaction reports of the company or business while balancing the accounts in QuickBooks.

Nevertheless, I will share with you the basic steps on how to write off bad debt in QuickBooks.

Probably you have been asking questions like;

  • How do I write off bad debt in QuickBooks desktop?
  • What is the best way to write off a bad debt in QuickBooks?
  • How do I write off customer balance in QuickBooks?
  • How do you write off a bad debt in QuickBooks online?
  • How to write off bad debt in QuickBooks 2019?

Today, you will get answers to all such questions here in this article.

One of the major reasons for writing off bad debts is to avoid variation in the account statements and profit and loss reports.

This makes it very important for businesses to write off bad debts in QuickBooks.

Now, here on this blog, you will get to see the full details and step by step guide to write off bad debt in QuickBooks Online.

Step by Step Guide on How to Write Off Bad Debt in QuickBooks Online

Below here are the steps and answers to all your questions on writing off bad debts in QuickBooks.

Step 1:  Examining of the Ageing Report A/R

  • Firstly, on the left side panel in QuickBooks, just click on “Reports Menu”.
  • Secondly, at the top, locate the search bar and search for “Account Receivable Ageing” report.
  • Then, click on the “Accounts Receivable Ageing Detail Report” to see your receivable account.

Step 2:  Creating the Bad Debt Account

  • Firstly, click on the Gear icon and locate the Company section, and select the Chart of Accounts option.
  • Now, click on the option to create a new account.
  • Next, you click on the Expenses option from the Account Type drop-down list.
  • Then, select all your Bad Debts from the Detail Type drop-down list and type in Bad Debt in the Name field.
  • Finally, click on Save and Close to end this process.

Step 3:  Set up a Service / Product Bad Debt Item

  • First, click on the Gear icon and select Product and Services from under the Lists section.
  • Secondly, choose the option of Product and Services from under the List section.
  • Then, click on the new product and then from the Product / Service Information section click on the Non-Inventory option.
  • Next, you type in “Bad Debt” inside the Name text box.
  • Now, select the Bad Debt expenditure that you have created in the Income Account section.
  • After that, unmark the “Is Taxable” check-box.
  • Finally, you click on the Save and Close option.

Step 4:  Set up a Credit Memo for the Bad Debt

  • First, you click on the plus icon at the top of your QuickBooks dashboard.
  • Then, you select the Credit Memo under the Customers section.
  • Next, you select the customer from the Customer drop-down list.
  • After that, choose the item that you have created for the bad debt in the Product / Service field.
  • Next thing is to type in the bad debt and unpaid invoices amount with positive values.
  • Also type in the bad debt amount into the Memo text box.
  • Finally, you will now click on the Save and Close button option.

Step 5:  Implement the Credit Memo to Apply for Credits

  • Quickly click on the plus icon located at the top of the screen and then navigate to the “Receive Payment from the Customers” section.
  • Next, you select the customer from the Customer drop-down list.
  • Then, select the invoice that you want to write off from the Outstanding Transactions menu.
  • After that, you will have to select the credit memo that you have created from under the Credits section.
  • Now check thoroughly and confirm if the amount in that section is showing $0.00.
  • Finally, just click on the “Save and Close” button option to complete this procedure.

Now, once you are done setting up the bad debt accounts in QuickBooks, you can always run and view all the bad debts and unpaid invoices anytime.

Follow these steps to run the bad debt report anytime any day;

  1. Click on the Gear icon.
  2. From under the “Your Company section” select “Chart of Accounts”.
  3. Search for Bad Debt
  4. Select the Action drop-down
  5. Click on Run Report.

 

So now, with the above steps you can confidently write off bad debts in your QuickBooks Online software.

These steps will as well guide you in creating, examining, setting up and implementing your debt-related data.

Hopefully, I believe with this guide you have learnt how to write off bad debt in QuickBooks Online.

Now, get to work and take advantage of this so as to record any uncollectible invoice as bad debt and write it off.

Then, ensure that your accounts receivable and net income are up-to-date.

Goodluck!

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