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.
The following sections provide the steps to take to write off a bad debt.
Before you address a non-collectible debt, review your Accounts Receivable Aging Detail report:
To begin the process, create an account for bad debts:
Select the Gear icon on the Toolbar.
Under Your Company, select Chart of Accounts.
In the Name field, enter Bad Debt.
Select Save and close.
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:
Under Lists, select Products and Services.
In the Product/Service information panel, select Non-inventory.
Clear the Is taxable checkbox.
The item is created. The next step is to create a credit memo for the debt.
To create a credit memo:
Select the Plus icon (+) on the Toolbar.
Select the customer from the Customer drop-down list.
The credit memo is created for the debt. The next step is to apply the credit memo to write off the bad debt.
To use the credit memo to write off the bad debt:
Under Customers, choose Receive Payment.
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:
From the Action column drop-down menu, select Run Report.
The report provides information about uncollectible receivables.
You must sign in to vote, reply, or post