Easy Methods to Write Off Bad Debts in QuickBooks Online
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QuickBooks is a well-known accounting software used by small to mid-sized businesses. This software is very helpful for its users. But sometimes, if you stuck a deal with a client and for some reason, they are refusing to pay you. This situation is known as QuickBooks Bad debt.
The steps for QuickBooks write off bad debt have been explained in the following blog.
What is Bad Debt in QuickBooks Online?
Bad debt is an amount which is unable to recover by a business or a company from the debtor. This happens because the borrower is unable to pay the debt due to some reason or has bankrupted. The issues related to QuickBooks Bad debt may affect the profit and loss reports during reconciling the accounts in QB. Bad debt is an unrecovered amount that is usually associated with account receivable. Due to this, it becomes necessary for a company to write-off bad debts in QuickBooks Online.
How 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 the 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.
Conclusion
To Conclude:
The steps to write-off bad debts have been mentioned in the above blog. We hope that the aforementioned steps assisted you to write-off bad debts in QuickBooks Online. There is a possibility that you may get stuck while performing any of the steps written above. In such cases, we advise you to call us immediately on our QuickBooks Online Error Support Number 1-855-857-0824.
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