As it so happens from time to time, you struck a deal with a user and poured your heart into working for him. However, for some reason, they are refusing to pay you, whether it be due to lack of funds or a disagreement about the project. Still, you will have to learn how to write it off as a bad debt in QuickBooks Online to keep a track of it. This blog aims to teach you how to do just that.
Write off Bad Debts in QuickBooks Online
When one of your promised invoices becomes a non-collectable in an unforeseen fashion, it becomes important to declare it as a bad debt to bring your books back to balance.
Follow the below steps and you should be able to write off your bad debts very easily
Step 1: Review the ageing report for your Accounts Receivable
This is the first thing you need to address before writing off bad debts in QuickBooks Online. Carefully review your Accounts Receivable Aging Detail Report. Here’s how you find it:
- · Use the left side menu to open the Reports section.
- · Open the Search bar.
- · Key in Accounts Receivable Aging.
- · Select the Accounts Receivable Aging Detail Report. This should display all your outstanding accounts receivable.
Step 2: Make a new account for bad debts
You will need to create an expense account. Start off the process with this:
- · Click on the Gear icon from the Toolbar above.
- · Open the Your Company.
- · Select Chart of Accounts.
- · Click New.
- · From the Accounts notification, click on Account Type.
- · From the drop-down menu that opens, select Expenses.
- · You should see a drop-down menu for Detail type. From this, click on Bad Debts.
- · Enter Bad Debts into the Name
Step 3: Create a product item or a service item
- · Click on the Gear icon from the Toolbar above.
- · Click on Lists.
- · Open the Products and Services list.
- · Click New.
- · From the information that opens, select the Non-Inventory option.
- · Enter Bad Debts into the Name field.
- · Go back to the Income Account field and select the newly created account.
- · Clear the checkbox for ‘Is taxable’.
- · Click on Save and Close.
Step 4: Draft a credit card memo
- · Click on the Plus icon from the Toolbar above.
- · From the drop-down list, select Customer.
- · Select the newly created bad debts to account from the Products/Services field.
- · Enter the amount.
- · Enter Bad Debt in the Memo field.
- · Click on Save and Close
Step 5: Apply the credit memo
- · Click on the Plus icon from the Toolbar above.
- · From the Customers tab, click on the Receive Payment.
- · From the list, select the customer.
- · Use the Outstanding Transactions section to select the invoices you would like to write off.
- · From under the Credits section, select the newly created memo.
- · The amount you have received has to be 0.00.
- · Click on Save and Close.
Step 6: Run a report for the bad debts
- · Click on the Gear icon from the Toolbar above.
- · Open the Your Company.
- · Select Chart of Accounts.
- · Locate the account created for bad debts expenses.
- · Click on Action.
- · From the drop-down menu that opens, click on Run Report.
Hope that helped!
That was our step by step guide on how to write off bad debts in QuickBooks Online. If you were unable to follow any of the steps or found something too complex, you are welcome to contact at QuickBooks Pro Solution. Our aim is to provide the best services with 100% user satisfaction, reaching different industries across the globe. For QuickBooks Customer service, you can call us at our QuickBooks helpline.
Phone number+1-800-469-4817
Visit us: https://www.qbprosolution.com
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