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Super Contributor

How to write off a bad debt

The term bad debts usually refers to accounts receivable (or trade accounts receivable) that will not be collected.  

 

So how do you write these off in QuickBooks? Find out here: 

 

 

Create a credit memo:

  1. Select the Plus icon (+) at the top > Credit Memo/Adjustment note.
  2. In the Customer: field select the customer name.
  3. For the Product/Service  field, select Bad Debt.
  4. Under Amount, enter the full amount you are writing off.
  5. Select Save.

Apply the Credit Memo:

  1. Select the Plus icon (+) at the top > Receive Payment.
  2. Select the Customer name.
  3. Below the form, all open transactions should be checked. If so, select Save. If there are no transactions, select Cancel

 

For any questions please do not hesitate to leave a comment or get in touch.

 

Kind Regards,

 

Emily Mockett

3 Comments
Contributor

Re: How to write off a bad debt

Hi,

That was a useful article.

Regular Contributor

Re: How to write off a bad debt

Nice article Emily!  I will use it for customers that struggle with this process.  

 

On a side note, if your business files a tax return on a cash basis, you don’t use “bad debts”, you just write off the invoice to the same item that you originally used in the invoice you are writing off. 

 

But if you use the accrual method, this is the way to do it. Very simply!  Cat Happy

Contributor

Re: How to write off a bad debt

There is another issue to consider. 

 

This assumes you are writng off each year what you think may be a bad det to the Allowance for Doubtful accounts. Which is on the balances sheet & reduces accounts Receivable.

 

At year end you would make a journal entry debiting bad debts & crediting this allowance account. Then when you actually wrtite the invoices off, it goes against the allowance account not the bad debt account since you already took the expense.

 

Lynda is correct, this s for the accrual method of accounting & not cash basis.