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francisconeto
Level 1

How to record allowance for doubtful accounts as an AR subaccount?

At the end of the year I would like to write off, for example, 30% of my AR as allowance for doubtful accounts. When I use a Journal Entry debiting "Bad Debt" and crediting "Accounts Receivable (A/R):Allowance for Doubtful Accounts" I'm required to specify a costumer. As it's a bulk allowance not linked to specific invoices, I used a dummy costumer, let's say "Undefined Costumer".

 

The problem with this, is that this costumer will forever have an open balance and will show in Open Invoices reports and I couldn't find a way to clear that.

 

At this same topic thread (https://quickbooks.intuit.com/learn-support/en-us/reports-and-accounting/allowance-for-doubtful-acco...), someone suggested to record the allowance for doubtful accounts in a "Other Current Asset" account that would go negative so that I'm not required to specify a dummy costumer.

 

The problem with this approach is that this account doesn't show as a subaccount of AR, which is very unusual and balance sheet ends up not as clear as it should.

 

How do I either clear those open balances entered through JE into my dummy costumer or properly record allowance for doubtful accounts as a subaccount of AR?

 

Thank you,

1 Comment 1
Rustler
Level 15

How to record allowance for doubtful accounts as an AR subaccount?

IMO QB does not lend itself to using an allowance for doubtful accounts since a/r is required to have a name per entry.

 

At the end of the year, just use a credit memo per customer to write off a/r that is deemed noncollectable.  If that noncollectable debt is paid in the future, then deposit the funds as income at that time

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