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i have a client who has several invoices from 2017. They use cash method. What is the best way to remove the invoices from overdue invoice report. they want to switch to accrual method and does not want them listed on the AR report.
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create and apply a credit memo to each 2017 invoice, back date the CM to the end of 2017
enter an explanation in the memo block too
since you file cash basis back then, those unpaid invoices were never included, so the CM you create will not affect cash basis report for that year.
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Thanks for your help.
When writing off an invoice from a prior year and running a Cash basis business, What account should be chosen for the credit memo?
I know credit memos Credit Accounts Receivable. Should the Debit side of the transaction be the same income account that was chosen on the original Invoice?
I understand that when running a CASH BASIS profit and loss statement, income is not recognized until received, so I know the Invoice was never included in the tax return.
I understand that Cash Basis Balance Sheet does not include Accounts Receivable (or Accounts Payable).
I understand that Cash basis businesses do not use "bad debt" expense when writing off invoices.
I'm just not certain what account gets chosen on the Credit Memo and how it will affect reports and where it will be put on tax returns.
Thank you for this post! I have a few questions to add to this if I may.