Thanks for posting here in the Community, @Anonymous.
When invoices can't be collected, it's important to mark them as bad debt and write them off to keep your accounts receivable and net income accurate. Allow me to walk you through the process of writing off bad debt in QuickBooks Online (QBO).
First, you'll need to create a bad debts expense account. Here's how:
- Go to the Chart of accounts.
- Click New to create a new account.
- Select Expenses from the Account Type dropdown.
- Choose Bad debts from the Detail Type dropdown.
- Enter "Bad debts" in the Name field.
- Hit Save and Close.
Afterward, you'll need to create a non-inventory item associated with the Bad debts expense account. Take note that this is only a placeholder used to balance the accounting and not a real item.
Here's a step-by-step guide on how:
- Go to the Products & Services page.
- Click New. Then, choose the Non-inventory type.
- In the Name field, enter "Bad debts."
- On the Income account dropdown, pick Bad debts.
- Press Save and Close.
Then, you can proceed to issue the credit memo. This time, you can select the Bad debts item. After that, apply the credit memo to the invoice. Once done, the uncollectible receivable will appear on your Profit and Loss report under the Bad Debts expense account
For more detailed steps on writing off bad debt in QBO, please feel free to browse through this article: Write off bad debt in QuickBooks Online.
You can also run reports in QuickBooks to get a comprehensive overview of how your business is doing.
Should you have any more queries about writing off bad debt in QuickBooks, please utilize the reply button, and I'll be here to assist you.
