Write off bad debt

I'll help you in writing off the balances of your invoices in QuickBooks, @Constdan91.

When creating a bad debt, let's make sure that we track this to an expense account. This way we can offset your accounts receivable on the Balance Sheet.
 

Here's how you to add an expense account to track the bad debt

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

Once done, let's delete the payment that you've created to write off the invoice. This way, we can start over to close out the unpaid invoice.

1. Open the invoice and click the Payment link in the right-hand corner.
2. Click Delete.
3. Once a prompt pops out, click OK.

After deleting the payment, we can now write it off again. Let me show you how:

1. Go to the Customers menu and select Receive Payments.
2. Enter the name of the customer in the Received from field.
3. For Payment amount, enter $0.00.
4. Click 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 account, and select Done.
7. Click Save and Close.

In addition, you can check your customers' open balances by running the Accounts Receivable Aging Detail report. Just follow these steps: 

1. Go to the Reports menu and select Customers & Receivables.
2. Click A/R Aging Detail. 

You can also customize this report to easily review the information that matters to your business the most. 

If you have further questions or concerns, feel free to reach back out anytime. Stay healthy and keep safe.

For more information on taxes, forms, filings, payroll and other Year End activities, make sure to check out our Year End Resources page.

My manager says he wants to ensure that when we write it off that is does not affect the income statement because they already created a allowance for bad debt that hit the income statement.

Does your solution of creating the bad debt chart of accounts avoid having the write off hit the income statement?

Sorry i am very new to Quickbooks

Thanks

Hello, @Constdan91.

I know how it is important to record correctly all of your transactions in QuickBooks. When invoices you send in QuickBooks Desktop become uncollectible, you need to record them as a bad debt and write them off.  

Since you already created an account called "allowance" there is no need to create an expense account to track your bad debt.

You can follow the steps above provided by my colleague except for the first steps. That ensures your accounts receivable and net income stay up to date. 

You can refer to this article for additional information. Write off bad debt in QuickBooks Desktop. 

Please let me know if you have other questions. Take care!

I keep being told that I can't enter a discount amount greater than the payment amount. So, if Im supposed to enter the payment amount as 0.00, how am I supposed to enter the write off amount in discounts?

Thanks for joining on this thread, @JenniMJ.

When writing off bad debt, the amount entered in the Amount discount field should be the same one displayed in the Amount Due section. This is to clear out the transaction and keep you from receiving the error message.

To continue with the process, I still suggest following the instructions provided by @ReymondO.

For tips and other resources on how to keep track of transactions and finances using QuickBooks, check out our self-help articles: Get started.

Stay in touch if you have any clarifications or questions. I’ll be right here to answer them for you. Have a good one.

I'm doing a review of the financials for a company that established their allowance account in 2018.  At the time they had a large amount of receivables past due over 60 days so the allowance was established making the entry below ($ for example purposes only):

Bad Debt                    $40k

Allowance                                  $40k

The collected almost all of the outstanding invoices during 2019.  Based on a review of the aging schedule according to the company's policy the allowance account should be ~$10k.  If I make an entry to adjust the allowance account in 2019 I will have bad debt that is negative -$30k which is unacceptable for GAAP statements.  If I use the Receivables account (which seems the logical way) then I would make the entry below:

Allowance               $30k

AR                                        $30k

Since QB requires a customer associated with JE's involving AR should I set-up an allowance customer?  Or will that screw up the AR balance?

Any advice or suggestions are welcome

Hello;

Assuming that the original AR amounts for the customers were not written off from AR and that amounts received were entered as collections on amounts receivable. Then all you are adjusting is the Allowance and the Bad debt expense amounts not touching the main AR account(s). Having a negative expense isn't so much against GAAP, its more that it just doesn't look nice. 

In this case instead of having the allowance account adjustment be recorded against Bad Debt Expense, just record it to the most applicable Other Income account you have.

DR   Allowance account        $30k

CR     Other Income                          $30k

Generally speaking, everyone expects expenses to have debit balances and positive amounts. Though sometimes for internal reporting it makes more sense to leave it as a negative expense as to readily see and understand changes between reporting periods, and then cleaning things separately (in excel or by external year end accountants) up for external financial reporting.

I'm trying to follow your instructions step by step, but when I try to "Save and Close" on payment screen, I get a Warning "to process this payment, select a payment method and fill in the required information ..." 

I had same issue, then I must have hit the right buttons in the right order and it let me save it.  

I'm coming up with mixed answers for this, and have some further questions. If I simply choose to create a general journal entry to move the invoices in questions from Accounts Receivable to my Bad Debt account, is there any other step I have to take to remove this from AR? I still see it when I pull the AR report, but I also see the negative amount to wash it out and basically make the total due $0.00

What is the difference from creating the journal entry (as I did) and going to customers > receive payments > and adding that 'discount' to the bad debt account?

Hello there, Jena11.

In QuickBooks Desktop, you have two options to write off bad debt either use journal entry or the Receive Payments feature. From the Receive Payments section, select the Discounts and credits to close out the unpaid invoices. Both ways have the same effect on your book. 

If you need further information about it, please consider checking this article: Learn what to do if you can’t collect money from a customer and need to write it off as bad debt in.... Also, if you need further help when handling your accounts in the future, you can reach out to your accountant to ensure everything will go properly within your company file.

Additionally, you here for more  details when recording journal entries in QuickBooks Desktop Windows.

Please visit here again if you have other concerns. The Community is here to help you anytime. Take care and stay safe.

I did the steps for write off, but when I open the invoice statement, the write off number is still on the there, but not in the A/R report. So is this normal or not correct?  Thanks

Great job in performing the steps in writing off bad debt, @yunxiguo1987.

Let me share additional insights about writing off bad debt in QuickBooks Desktop.

When you offset a bad sale in the system, the figures will show up on the invoice. The write-off amount will appear as it indicates the data on what happened to the invoice that you made.

That said, the information that's showing up on your end is correct. The AR report will have a zero balance for your customer. If you happen to see any balance, you may consider reviewing the steps that you made.

Please see this article for complete details about the process: Learn what to do if you can’t collect money from a customer and need to write it off as bad debt in ...

I'm also sharing this great link that you can refer to, if you need help with writing off customer and vendor balances in QuickBooks Desktop: Two ways to remove balances.

It'd be my pleasure to help you if you have any other questions with QuickBooks. Have a good one!

When the book (2019 or earlier) is already closed by a 3rd party accounting/bookkeeping provider but the invoice is later paid, should I go ahead and delete the bad debt though I cannot add the payment without unlock the closed book?

Our company has a back end where we keep track of the invoices, orders, payments... We are trying to ensure the back end and QB info match and clean up the bad debts that are already paid.

These steps are not apparent in my QB online screens.  When I click on a customer "invoice", "Receive Payment" is in the upper right hand corner.  I cannot "delete" this. 

I can set the Payment amt to $0; but then at the bottom of the screen  I do not see"Discounts and Credits", I only see Discount-percent, Discount-amt.  I then added a Description "Bad Debt" to clarify and Save.

 I see the invoice is now $0. I am unclear if this is processed correctly. 

Thank you for reaching out to the QuickBooks Community, MarcelleW.

The instructions in this thread are listed for QuickBooks Desktop. QuickBooks Online has a different approach, which involves creating a bad debt expense account,  bad debt item, credit memo, and then applying the credit memo to the invoice. The article below will highlight all the steps associated with it.

• Write off bad debt in QuickBooks Online

Let me know if you need clarification for any of the steps! I will be here to guide you. I hope you have a great day.

I have a customer account that had about 100 invoices from 2013 that were uncollectable. 

Customer Balance: $5,800 (100 invoices)

Journal Entry Made in 12/31/2014                                 Debit            Credit

                                 Accounts Receivable                   $7,450

                                 Allowance for Doubtful Account                         $7,450

How do I clear out the outstanding invoices as it still shows up in my aging report? I tried going to the receive payment and then discount, but it wouldn't let me enter the discount of bad debt.

Hello, Medexhco.

I'll help you in clearing out the outstanding invoices that appear in the Aging report.

This happens when the journal entry isn't linked to the invoices. You'll need to write it off as bad debt if you're unable to collect money from your customer. This keeps your receivables and net income current. You can close out the unpaid invoices displayed in the Aging report. I'll show you how.

1. Go to the Customers menu, select Receive Payments.
2. locate the name of the customer in the Received from field.
3. Enter $0.00 in the Payment amount field.
4. Choose Discount and credits.
5. In the Amount of Discount field, enter the amount you'd like to write off.
6. For the Discount Account, select the Allowance for Doubtful account, then click Done.
7. Hit Save and Close.

Repeat the same process for the rest of the unpaid invoices. I've also added this resource for more insights: Write off bad debt in QuickBooks Desktop.

You can also look at the various article: Sales and Customers. This will provide you with links to resources on how to manage your company's income as well as other customer-related concerns.

Let me know if you still have questions or concerns about achieving a write-off in QuickBooks. I'll be here to help you. Take care and have a good one.

I followed the instructions to Receive Payment and entered the amount in the Discounts and Credits, but I still see the amount in our Income section. I only want to see it in my expenses

Thank you for joining the thread, @KimL23. I’ll help you with writing off bad debt in QuickBooks Desktop (QBDT).

Let's make sure we trace a bad debt to an expense account when we create it. On the Balance Sheet, we can offset your accounts receivable this manner.

Here's how to set up an expense account to keep track of bad debt:

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

Once done, let’s close out the unpaid invoices by following the steps below:

1. Select Receive Payments from the Customers menu.
2. Enter the customer's name in the Received from field.
3. Enter $0.00 for Payment amount.
4. Select Discounts and credits.
5. In the Amount of Discount field, type the amount you want to write off.
6. Select the account you added in step 1, for Discount Account, and select Done.
7. Select Save and Close.

In addition, you can check out this article when reconciling your account in QuickBooks Desktop.

Let me know in the comments if you need further assistance with a sales transaction. The Community always has your back. Have a great day!

I've done all those steps, but the invoice amount shows up as income (Services) and expense (Bad Debt Expense) in my Profit and Loss Statement. How do I keep it from showing up as income?

Thank you for getting back to the thread, @KimL23. Let me guide you how you can keep it from showing up as income.

You'll need to update the affected account of the item. You can follow the steps below:
 

1. Go to Lists and select Items lists.
2. From there click on the item and edit.
3. After that, open the invoice and remove the affected item
4. Re-enter the item.
5. Save the changes.
    

After that, refresh the Profit and Loss report to check the changes.

In case you want to customize any report that you generate, you can refer to this article: Customize reports in QuickBooks Desktop. You can also refer to the steps provided below:
 

1. Run a report.
2. From the Report window, choose Customize Report.
3. On the Modify Report window, go to the tab/s you need to update.
4. Once done, select Ok.
    

Additionally, please check out this article if you want to learn how to create and manage reports in QuickBooks Desktop.

Ping me a reply if you have further clarification or additional information about your Profit and Loss report. I'll be here to assist you. Take care and have a good one!

@GebelAlainaM  what item am I editing?