How to handle Bad Debts

Legacy KB ID: 2114

Question

How to go about writing off a bad debt?

Answer

From your Chart of Accounts, choose New. You will need to set up a Bad Debts expense account.

- To open your Chart of Accounts, press CTRL+A, or from the List menu, choose Chart of Accounts

Next step will be to set up a service item that will be linked with this Bad Debt expense account.

- From the List menu > Item list, choose New

- Call it Bad Debts and leave the amount as zero as you will have the flexibility of putting any amount you choose in

- Choose the Bad Debts expense account that you just created

Assume there is an invoice currently outstanding and waiting for settlement.

- Produce a Refund and adjustments

- Apply the same customer and choose the Bad Debts item

Note: The tax code on the refund and adjustment must match the on the invoice for you BAS to be correct

- Click Save and Close. This customer will now have an outstanding credit waiting to be applied, for this particular customer

- From the Customers Navigator, choose Receive Payments

- Choose the customer with the existing credit to apply to the invoice waiting for payment

- Choose the particular invoice and press the Set Credits button, and apply the amount of that credit and press Done

- Make sure that the receive payments screen has all the information, amount of payment etc.…

You have now accounted for a Bad Debt in Reckon Accounts. To check that it has gone through you can check it against a Profit and Loss report or Tax Summary report.

Need more help?

Ask the Reckon Community at: https://community.reckon.com/

Or Log a Support Ticket: https://www.reckon.com/au/support/