How to write off Bad Debt in QuickBooks

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How to Write Off Bad Debt in QuickBooks?
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QuickBooks might be one of the most sophisticated
and popular business accounting software at the
present and the application which rules the space
of business utilities in the virtual world, but
it certainly cannot counter or replace all the
nitty-gritty of the business that takes place in
the real world. One of the harsh realities for
business owners is bad debt. Occasionally when an
organization has done everything they possibly
could to get their payments back and remained
unsuccessful in doing so, then they have to write
them off as debts. This blog will guide you in
getting bad debt off the back of your financial
accounting software by giving you step-by-step
information about how to write off bad debt in
QuickBooks.
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What is bad debt and why you should write them
off in QuickBooks?
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Bad debt is the amount that a company or business
fails to recover because the person, group, or
company that has taken the debt cannot pay the
debt for some reason or has gone bankrupt. When
you are reconciling the accounts in QuickBooks,
then issues related to debt can have consequences
on the profit and loss reports as well as sales
and income statements of a company. There are
some businesses such as that of finance companies
where sales are made on credits and there is a
need to have a separate bad debt account. When
bad debts are written off in QuickBooks only then
will the invoices get cleared from the account
receivables and you will get the accurate profit
amount in QuickBooks.
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What are the steps to write off bad debt in
QuickBooks?
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• Step 1-Examining the Account Receivables Aging
  Report
• Use the Accounts receivable Ageing Details report
  to check the receivables or invoices which are
  bad debt. For this follow these steps-
• From the Reports menu, open an Accounts
  Receivable Ageing Detail Report.
• Examine those outstanding accounts receivable
  which should have been written off.

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• Step 2- Creating a Bad Debt Account
• For this, go to settings and choose Products and
  Services.
• Click on New and then on non-inventory.
• Write Bad debts in the Name field.
• Click on Bad Debts, click on Income Account.
• Lastly, click on Save and close.

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• Step 3 - Setting up a bad debit item
• Firstly, go to settings and click on products and
  services.
• Click on New and then on Non-Inventory.
• Now enter Bad debts in the name field.
• Choose the Bad Debts option from the Income
  account.
• Press Save and close.

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• Step 4- Creating a credit memo
• Click on New and choose the Credit note option.
• From the Customer drop-down menu, click on
  Customer.
• Click on Bad Debts in the product/service column.
• Provide the amount to be written off in the
  amount field.
• Now in the box displaying Message displayed on
  the statement , click on Bad Debt.
• Click Save and close.

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• Step 5 - Implementing the Credit Memo to an
  Invoice
• Click on New.
• From the customer's option, click on Receive
  Invoice Payment / Receive Payment.
• Choose the right customer from the customer
  dropdown.
• Select the credit note from the credits section.
• Click on Save and Close

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• Step 6 Running a bad debts report
• An Account Quick Report can be executed to review
  the receivables tagged as a bad debt.
• First, go to settings and click on Chart of
  Accounts.
• Select Run Report from the Action column of the
  bad debts account.

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We hope that using the information and the
resolution mentioned above, a bad debt account
can be set up in QuickBooks, reports could be run
efficiently and all the bad debts and unpaid
invoices can be easily viewed. You may now
continue to successfully run your business
without fiscal disparities caused by bad debts.
Source Dancing Numbers