Easy Methods to Write Off Bad Debts in QuickBooks Online

how to write off bad debt in QuickBooks Online

Published by John Smith at December 26, 2018

Write off Bad Debts in QuickBooks Online

When one of your promised invoices becomes a non-collectible in an unforeseen fashion, it becomes important to declare it as a bad debt to bring your books back to balance.

Steps to Write off Bad Debts in QuickBooks Online

Follow the below steps and you should be able to write off your bad debts very easily.

Step 1: Review the aging report for your Accounts Receivable

This is the first thing you need to address before writing off bad debts in QuickBooks Online. Carefully review your Accounts Receivable Aging Detail Report. Here’s how you find it:

Use the left side menu to open the Reports section.
Open the Search bar.
Key in Accounts Receivable Aging.
Select the Accounts Receivable Aging Detail Report. This should display all your outstanding accounts receivable.

Step 2: Make a new account for bad debts

You will need to create an expense account.

Start off the process with this:

Click on the Gear icon from the Toolbar above.
Open Your Company.
Select Chart of Accounts.
Click New.
From the Accounts notification, click on Account Type.
From the drop-down menu that opens, select Expenses.
You should see a drop-down menu for Detail type. From this, click on Bad Debts.
Enter Bad Debts into the Name field.
Click on Save and Close.

Step 3: Create a product item or a service item

Click on the Gear icon from the Toolbar above.
Click on Lists.
Open the Products and Services list.
Click New.
From the information that opens, select the Non-Inventory option.
Enter Bad Debts into the Name field.
Go back to the Income Account field, and select the newly created account.
Clear the checkbox for ‘Is taxable’.
Click on Save and Close.

Step 4: Draft a credit card memo

Click on the Plus icon from the Toolbar above.
From the drop-down list, select Customer.
Select the newly created bad debts to account from the Products/Services field.
Enter the amount.
Enter Bad Debt in the Memo field.
Click on Save and Close.

Step 5: Apply the credit memo

Click on the Plus icon from the Toolbar above.
From the Customers tab, click on the Receive Payment.
From the list, select the customer.
Use the Outstanding Transactions section to select the invoices you would like to write off.
From under the Credits section, select the newly created memo.
The amount you have received has to be 0.00.
Click on Save and Close.

Step 6: Run a report for the bad debts

Click on the Gear icon from the Toolbar above.
Open Your Company.
Select Chart of Accounts.
Locate the account created for bad debts expenses.
Click on Action.
From the drop-down menu that opens, click on Run Report.

That was our step by step guide on how to write off bad debts in QuickBooks Online. If you were unable to follow any of the steps or found something too complex, you are welcome to contact at QuickBooks Online Error Support Number 1.888.502.0363.

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