Financial discrepancies can be circumvented using the option to write off bad debts on QuickBooks financial management software. If you want to avoid miscalculations and wish to record bad debts in QB, then in this article, we have discussed the process for Writing off Bad Debt in QuickBooks to get a net profit amount.
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How can you Set Up the Item “bad debt” in QuickBooks Online?
Below are the steps to get the task accomplished:
- Firstly, select the accounting option available on the left side of the screen. Then, click on the chart of accounts and, on new in the upper right corner
- Convert the account type to income and name the account bad debt. Once done, Select save and close
- Click on the big gear icon
- Click on products and services under the column called lists
- Click on new and service and name the service as Bad Debt
- Change the income account from income to bad debt
How To Go About Writing Off Bad Debt In QuickBooks?
If a borrower has gone bankrupt, you might not recover money from the debtor. It can also happen when the debtor is not able to pay the debt. This is called a bad debt, and in QuickBooks, it needs to be written off. It is essential if you want to avoid issues with income statements. Profit and loss reports should be well balanced, and that is why Writing off Bad Debt in QuickBooks is of utmost importance. Your business can require a separate account for bad debt. Sales on credit are often made in companies dealing with finances. For this reason, this different Account is essential. If you write off the bad debt, you cannot get a correct estimate of your company’s net profit, but also clear the invoices from the receivables of your Account.
You need to click on Reports from the panel to the left of QuickBooks for writing off bad debt. Look for Account Receivable report from the top search bar and then click on the Accounts Receivable Aging Detail Report for viewing the outstanding receivable Account. This step is called Examining The A/R Aging Report.
Next, you should create a bad debt account in your QuickBooks Online or Desktop version. Press the gear icon and select Chart of Account. Click on CREATE NEW ACCOUNT and press the Expenses button from there. The detail Type drop-down menu would help you choose all the bad debt. Name this as the Bad Debt page and click on Save. Next, press close for ending the process.
Setting up the service of product bad debt items can be done by clicking on the gear icon and choosing Product and Services from there. Next, click New Product and then Non-Inventory Option. In the space to enter the name, type Bad Debt and accept the Bad Debt expenditure. Uncheck the “Is Taxable” option and click on CLOSE after saving your actions.
Credit Memo should be set up. On your QuickBooks dashboard, you need to click on the plus icon and click on Credit Memo. From the drop-down menu, choose the customer and then the item that you created for bad debt. Enter the number of unpaid invoices and click on CLOSE after you save your actions.
The final step in this process would be to implement the credit memo. Click on Receive Payment From Customers by clicking plus icon from the screen. Choose the customer and then finally select the invoice you would like to write off. This can be done from the Outstanding Transactions section. Under the credits section, you would find the option to select a credit memo. Ensure that the amount is $0.00 in that region and click on SAVE and CLOSE to end the process.
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Get Expert’s Assistance!
Doing this would help you in Writing off Bad Debt in QuickBooks. From the unpaid invoices section, you can view the total amount of bad debts and unpaid invoices. In case you are unable to perform the process on your own and need additional support with corrupt company files, dial toll-free number 1.800.417.5147. Look for an organization with motivated data service team members and technicians who can help you run your business smoothly. As their solution consultants are experts at resolving errors and guiding you to use QuickBooks like a pro! For top-notch services on QB, get in touch with the error support team