Learn how to write off bad debt in QuickBooks Online.
When an invoice becomes non-collectible, you need to write it off and declare it as a bad debt to clear the invoice out of your accounts receivable and reduce your net profit by its amount.
Before you address a non-collectible debt, review your Accounts Receivable Aging Detail report.
To begin the process, create an account for bad debts
The expense account is created. The next step is to create a non-product or service item to identify the bad debt.
To create a product/service item for the bad debt
The item is created. The next step is to create a credit memo for the debt.
To create a credit memo
The credit memo is created for the debt. The next step is to apply the credit memo to write off the bad debt.
Note: Credit memo will be applied automatically if you've turned on the setting to automatically apply credits. If you've turned on this preference before, proceed to Step 6.
To turn on the Automatically apply credits preference
To use the credit memo to write off the bad debt
The uncollectible receivable now appears on your Profit and Loss report under the Bad Debts expense account.
You can run a report detailing bad debts from the Chart of Accounts.
The report provides information about uncollectible receivables.
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