Write off bad debt in QuickBooks is a feature that allows businesses to reduce the value of uncollectible accounts receivable (AR) balances. This procedure is also referred to as “accounts receivable write-off” or “bad debt write-off.” This feature is intended to assist businesses in recording the value of any outstanding invoices that are to be contained in the future. Businesses can use the write-off bad debt feature to create journal entries that record the reduction of the AR balance and the resulting bad debt expense. It should be noted that the write off bad debt feature should be used only when the outstanding amounts are uncollectible.
In this blog, we are going to provide you with the step for writing off bad debt in the QuickBooks Desktop and Online versions. But first, let’s know its benefits.
Benefits of Write Off Bad Debt in QuickBooks?
Below are some advantages of writing off bad debt, these are:
- Writing off bad debt in QuickBooks helps to clear out any uncollectible accounts receivable balance.
- It enables you to record the loss in a timely and accurate manner, accurately reflecting the company’s financial position.
- It aids in the removal of bad debt from the balance sheet and the reduction of total debt.
- Also, prohibits the company from taking any further action to collect the debt.
- It lowers the amount of taxes that the company must pay.
- QuickBooks allows you to write off bad debt quickly and easily without having to manually enter the information.
- The write-off is also recorded in the company’s general ledger quickbooks, assisting in the proper accounting of all transactions.
After getting about benefits, let’s write off bad debt in the Online and Desktop Version
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How to Write Off Bad Debt in QuickBooks?
In QuickBooks, bad debts and uncollectible amounts should be recorded. because it makes it simple for QuickBooks users to remember and notify themselves about pending debts You don’t need to bother because the process for paying off these bad debts differs between desktop and online; we’ll walk you through each step for both. The steps are as follows:
How to Write Off Bad Debt in QuickBooks Online?
Here in this section, we are going to write off a bad debt in the Online version of QuickBooks. Follow the step-by-step procedure:
Step 1: Examine Your Ageing Accounts Receivable
To begin to write off bad debt in QuickBooks Online, you must first review other receivables or invoices that should be deemed as bad debt using the Accounts Receivable Aging Detail report. Now go over the following:
- To begin, navigate to the Business Overview tab and select Reports.
- Then, look for and open the Account Receivable Aging Detail Report.
- Now you must review which outstanding accounts receivable must be written off.
Following that, we will set up an expense account to track bad debts. Let’s get started.
Step 2: Add An Expense Account For Bad Debts
To track all bad debt and then write it off in QuickBooks Online, you must create a bad debt expense account. Take the following steps:
- Navigate to Settings in QuickBooks Online.
- Then navigate to the Chart of Accounts.
- To create a new account, click New in the upper right corner.
- In the following step, using the Account Type dropdown, select Expenses.
- Then, from the Detail Type dropdown, select Bad Debts.
- Enter “Bad Debts” in the given Name field
- Finally, click the Save and Close buttons to proceed to the next step.
Step 3: Create a Bad Debt Item
As a bad debt placeholder, we will create a how to add inventory in quickbooks item in this step. Don’t be concerned; it is not a real item; it is only present to balance the accounting. Now, complete the following steps to write off bad debt in QuickBooks Online version:
- First, select Settings and then Products and Services.
- Second, from the upper right corner, select New.
- Select the Non-Inventory
- Then, in the Name field, write or choose Bad Debts.
- Next, select the Bad Debts option from the Income Account
Step 4: Dealing with Bad Debt Make a Credit Memo
The following steps will be taken in the next step of the online write off bad debt in QuickBooks:
- Select +New, then Credit Memo.
- Select the customer from the Customer dropdown.
- Then, from the Product/Service section, select Bad Debts.
- Then, in the Amount field, enter the amount you want to write off.
- Type Bad Debt in the Message Displayed on the Statement box.
- Finally, click Save and Close.
Step 5: Request a Credit Memo for the Invoice
Now, in order to write off bad debt in QuickBooks, we will apply for the credit memo to be added to the quickbooks invoicing with the following:
- In this window, select +New.
- Then select Receiving Payment from Customers.
- Select the specific customer from the Customer dropdown.
- Then, from the Outstanding Transactions portion, you have to select the Invoice.
- Then, in the Credit section, select Credit Memo.
- Finally, click the Save and Close
When you use the credit memo, the uncollectible receivable appears on your Profit and Loss statement below the Expense Account of Bad Debts.
Step 6: Run the Bad Debt Report
In the next step to write off bad debt in QuickBooks procedure, we check all receivables that you record as a bad debt by running Account Quick Report. The steps are as follows:
- To begin, navigate to the Settings menu and select Chart of Accounts.
- Second, from the Bad Debts account Action menu, select Run Report.
To inform specific customers about the bad debt without informing other customers by adding a note to their name. The following are the steps:
- To begin, choose the Get Paid & Pay
- Then, select Customers and enter the customer’s nam
- Now, from the upper right, select Edit.
- Fill in the “Display Name as” box field after the customer’s name with “Bad Debt” or “No Credit.”
- Finally, press the Save
How to Write Off Bad Debt in QuickBooks Desktop?
The QuickBooks Desktop version is installed locally, records bad debts, and writes them off to notify you at a later date. It is QuickBooks’ best feature, ensuring that all accounts receivable and net incomes are up to date. The following are the steps to write off:
Suggestion: The Accounts Receivable Aging Detail Report can help you keep track of your clients’ open balances.
Step 1: Make an Expense Account to Track Bad Debts
In the first step, create a bad debt expense account in QuickBooks version Desktop to write off bad debt.
- To begin, navigate to the Lists menu in QuickBooks Desktop.
- Second, select the Chart of Accounts option, followed by Expense, and then click Continue.
- Then, for the Expense Account, enter an Account Name, as well as Bad Debt.
- After you’ve entered the account name, click Save and Close.
After creating an expense account in QuickBooks to track all bad debts, use the following to close all unpaid invoices:
Step 2: Resolve Any Outstanding Invoices.
In this step, we will complete all unpaid invoices using the following steps to write off bad debt in QuickBooks:
- Navigate to the Customers menu.
- Select Receive Payments.
- In the Received From box, you have to enter the customer’s name.
- Enter $0.00 as the Payment Amount
- Select the Discounts and Credits option in the following step.
- Then, in the Amount of Discount box, enter the amount you want to deduct.
- Then, for the Discount Amount, select the Expense Account from Step 1 and click Done.
- Finally, click Save and Close.
The Write off bad debt in QuickBooks feature is the greatest way to record and create journal entries. With this blog, we provide you with the procedure for writing off bad debt in QuickBooks Desktop and Online versions. If you need help writing off bad debt, please contact us directly. We offer a wide range of services including QuickBooks setup and training, bookkeeping, and financial consulting. Also, can help you write off bad debt and provide guidance on best practices for tracking and managing your accounts receivable. We look forward to hearing from you.