Issuing Credit Memo/Write Off to Specific GL Account

Anonymous · ‎January 12, 2024

I have a customer that had an open invoice balance at end of 2022. Our fiscal year is Dec 31. During 2023, they made payments for that invoice and there's a small balance of $750 remaining that I want to write off on Dec 31/23. I want the $750 to go to an expense account for bad debts. When I go to issue the credit memo, I only have an option to select from the Product/Service dropdown. There's no option to select an expense GL account. So the $750 would be applied as negative revenue which I don't want. Is there any way to reduce the invoice to zero but have the remining balance go to a specific GL account? Do I need to create a product/service called bad debts?

AnneMariee · ‎January 12, 2024

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.

View solution in original post

AnneMariee · ‎January 12, 2024

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.

1202 · ‎August 05, 2024

Good Morning; my issue is i have owners who pay fees annually. I have lots of under $1.00 credits that i want to write off vs. issuing a check for refund. how can i write off the credit? thank you for any assistance. Jo Ann

Candice C · ‎August 05, 2024

Good afternoon, @ 1202.

Thanks for reaching out on this thread about writing off bad debt.

To clarify before moving forward, have you tried the steps listed on this guide below:

Write off bad debt in QuickBooks Online

I'll be waiting for your response!

Erss

Same question, but in reverse, how do I zero out a customer account with a credit/- in account without applying it to an invoice? Thank you!

BabyB

You can record a refund expense and link it to the credit memo to zero out the customer credit without applying it to an invoice, Erss.

Here's how to create a refund expense:

Go to +Create, then select Expense.
From the Payee dropdown, select the customer from whom you are refunding.
From the Payment account dropdown, choose the bank account from which the money is being refunded from.
In the Category column, select Accounts Receivable.
In the Amount field, enter the total amount of the refund.
Hit Save and close.

Once done, you'll have to link the refund expense to the credit memo to close the transaction. Here's how:

Go to +Create and click Receive payment.
From the Customer dropdown, select the same customer.
Fill in the Payment method and Deposit to fields.
In the Outstanding Transaction section, check the box for the expense you created.
Make sure the balance is $0, as the credit memo and expense will cancel each other out.
Select Save and close.

This process will mark the customer’s credit memo as paid and record the refund expense, keeping your accounts receivable and bank account balances accurate.

On the other hand, if your customer prefers not to receive a reimbursement, you can record it as a tip. This will offset the customer’s credit without reducing your bank balance.

If you have any further questions, please reply below. The Community team is here to help.

Erss

This seems to be QB Online? How about for QB Desktop 2019?

Erss

NM I never received payments from the customer once the refund was originally issued. Thank you!

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Issuing Credit Memo/Write Off to Specific GL Account