How to create an allowance for doubtful debts account

Help has arrived, @savita-clearnexu.

Of course, I'd be happy to provide steps about how to create a contra- account in QuickBooks Online (QBO). This way, you can start tracking them right away. 
 

You'll need to create a chart of accounts (COA) for your allowance for doubtful debt to personalize the data. Follow the steps below: 

1. Go to the Accounting tab on the left side, then choose Chart of Accounts. 
2. Click the New button on the right pane. 
3. In the Account Type drop-down, choose Accounts Receivable.
4. Select appropriate Detail Type in the field. 
5. Enter allowance for doubtful debt in the Name box. 
6. Complete the necessary fields, then hit Save and close. 

For more details, check out this article: Add an account to your chart of accounts in QBO. 

Additionally, I suggest that you consult an accountant. They can help you choose the appropriate account types. 

For this transaction, you can create a pending invoice so that if your customer pays, you can receive the payments directly. But if your customer doesn't pay you anymore, you can set up a bad debt account. This way, we can ensure that your accounts receivable and net income are up to date. For additional information, see this link: Write off bad debt in QuickBooks Online.

Furthermore, feel free to visit these articles below on how to hide, delete, and add account numbers to personalize them:

• Learn about the chart of accounts in QuickBooks
• Learn about usage limits in QuickBooks Online

Remember that you can always ask me about any topics or other processes within QuickBooks. Just notify me in this thread, and I'm here to help you again, SN. Keep safe.

Why should I create an income account?  Allowance for Bad Debts is a balance sheet item (contra to Accounts Receivable).  

It sounds like you are saying you cannot really create a Allowance for Doubtful accounts as a contra to AR. I am in desktop not QBO. Perhaps like the original questioners intent, I want to leave the AR in AR but reserve some amount that is not the whole invoice let's say 20% in my case. I want this to be visible on the accrual basis books, but not visible on cash-basis since no cash has been paid. I am afraid if I do this by JE it will flow through cash basis financials. So what is the solution?

You could try the suggestions described in this article:

Write off bad debt in QuickBooks Online (intuit.com)