Bad Debt invoices on Cash Basis QBDT 2019 Premier

Hello there, Jbear1212.

Allow me to show you how we handle them in QuickBooks.

When invoices you send in QuickBooks Desktop become uncollectible, you need to record them as a bad debt and write them off. You can do this process though you're in an accrual or cash basis accounting method. This ensures that your account receivables and income are up-to-date. 

We'll have to create an expense account to track the bad debt if you haven't yet.

1. Go to the Lists menu and select Chart of Accounts.
2. Select the Account menu and then New.
3. Click Expense, then Continue.
4. Enter an Account Name, for example, Bad Debt.
5. Select Save and Close.

If you already have an expense account to track bad debts, you can proceed to closing out the unpaid invoices. Here's how:

1. From the Customers menu and select Receive Payments.
2. Select the customer. 
3. Enter a zero amount in the Payment amount field. 
4. Select Discounts and credits.
5. In the Amount of Discount field, enter the amount you'd like to write off.
6. For Discount Account, select the bad debt expense account and select Done.
7. Select Save and Close.

Feel free to use this link on how to record common customer transactions in QuickBooks Desktop. 

I'll be here if you have other questions in handling your sales transactions in QuickBooks. I'll be here to help. Have a good one!

First, I want to confirm that this is the proper accounting for a Cash Basis system.

Second, I opened a Customer Payment window, selected the customer, left the Payment Amount as $0.00, but Discounts and Credits is greyed out in this window. Is this something that needs to be edited in the "Preferences" section? Or how would I access this since it's not available in this window.

Thank you!

Thanks for the update and for giving it a try, @Jbear1212.

I have here other steps to ensure you can apply a discount to your bad debt invoices in QuickBooks Desktop. 

The Discount and Credit button will be greyed out if there are no unpaid invoices for that customer. See the sample screenshot below for your reference. 

Since the Discount and Credit button is greyed out even though the customer has a bad debt transaction, you'll want to create a discount item as another option. Then add it on the bad debt invoice as a negative amount. Let me show you how. 

1. Go to the Lists menu, then choose Item List. 
2. Click Item drop-down and pick New. 
3. Select Discount in the Type box. 
4. Type an Item Name in the field. 
5. Pick the Expense account you've previously created in the Account drop-down. 
6. Click OK. 
7. Go back to the Customer Center, then click the old invoice and add the discount item in the second line. 
8. Make sure the amount is negative, then tap Save and Close. 

Once done, you can go to your Chart of Accounts to review the discount you've previously entered. Simply click Ctrl + A and look at the expense account you created. 

Additionally, you can always run any customer reports to track all the transactions and personal information entered into the system. Then customize it to show specific details. For the complete steps, visit this page: Understand reports.

Lastly, check out these pages to learn how to create a credit memo/ refund in QuickBooks and other related matters. 

• Give customer a credit or refund 
• Void or refund customer payments

Drop a comment below if you have more questions about your bad debt invoices. I'm here whenever you need more help. Keep safe. 

"... a cash-basis taxpayer cannot write off the invoice on their tax return because the amount of the invoice was never included in their taxable income."

This is from Nerd Wallet and makes sense.  So is there a report in Quickbooks which can be run which ignores the bad debt for the purposes of the tax return?   I usually send our tax accountant the P&L to work from.  Maybe I just need to tell him to scratch out the bad debt expense.  What do you think?

Hi TB2021!

Thanks for joining this post. Let me assist you in running the report you need.

You'll want to pull up the Transaction List by Customer. From the Reports menu, select Customers & Receivables, then select the said report. With this report, you'll see the bad debt under the Credit column. Here's what it looks like:

Just make sure to close out the unpaid invoices the correct way. Check this article for more details: Write off bad debt in QuickBooks Desktop.

Also, you can pull up the Transaction Detail by Account. You can find it on the Reports menu, then Accountant & Taxes. This will show all transactions on each account on a selected period. Then, simply locate the expense account you used to track the bad debts and you'll see the total amount.

I also added this link if you need help in customizing and saving financial reports: Understand reports.

Post again here if you have other questions. I'm looking forward to assisting you again. Have a great day!

My accountant stated the same thing, Bad Debt cannot be written-Off or deducted on a cash basis and the P&L should reflect that.

QuickBooks please provide a real solution and not a workaround.

Thank you for responding in this thread, jazminharth.

Let me share some information about bad debt in QuickBooks Desktop.

Once you've followed the steps provided by my colleague Catherine_B above in setting up an expense account to track your bad debt, you can pull up the Profit and Loss report to show the bad dept transaction that you've entered.

Here's how:

1. Click Reports, then Company and Financial.
2. Select Profit and Loss Standard.
3. Under Expense, double click the amount next to the Bad Dept account.

For more details, check out this article to learn more about writing off unpaid invoices: Write off bad debt in QuickBooks Desktop.

I've also included this link for your future refence in handling customer transactions.

Keep us posted if you still have other concerns about bad debt. We'll be here to help. Have a great day!

@jazminharth @TB2021 

QB has limitations regarding writing off uncollectible accounts on cash basis. 

You can write it off to bad debt as explained above using a credit memo.  What hasn't been explained is that, when you do this, sales income is increased by the same amount so the net effect is $0.  Technically, yes, it should not be a sale or an expense but, again, this is a limitation of QB.  This method keeps sales tax accurate as most states do not allow sales tax to be paid on cash basis.  Your accountant can make year-end adjustments to accommodate these transactions or you can just create a journal entry to offset the paid invoice - debit sales, credit bad debt expense. 

I love how the QB replies are completely ignoring the question. I get the feeling if not already all these replies are chat bots with standard garbage answers. We really have lost our way. No one is avail to help anyone and no humans actually interact. All customer service is turning to absolute trash. QB Desktop is also incapable of actually accounting for cash basis revenue. That button on the P&L doesn't actually work you still have to do all the work and like you said there is no actual solution in QB just a bunch of workarounds.  its annoying. And they keep jacking up fees for worse and worse product.