Writing off a Bad Debt in QuickBooks QBi
Legacy KB ID: 376
QuestionHow do I write off a Bad Debt in QuickBooks QBi?
Follow the steps outlined below to account for a Bad Debt in QuickBooks:
- Open your Chart of Accounts by going through your Lists Menu or pressing CTRL + A on your keyboard
- From your Chart of Accounts, choose New. Set up a Bad Debts account with the account type Expense
- Set up a Service item which will be linked to this Bad Debt account. To create the Item:
a. Go through the Lists menu and select Item List, click the Item button and select New
b. Give the item a name e.g. Bad Debts, leave the Rate field as 0.00, don’t select a Tax Code
c. Select the Bad Debts account you created and click OK
Assuming there is an Invoice currently outstanding and awaiting settlement
- From the Customers Menu choose Create Adjustment Notes/Refunds
- Select the correct Customer and choose the Bad Debts item, enter the amount of the bad debt and select the relevant Tax Code
Note: The tax code you select for the Bad Debts item on the Adjustment Note/Refund must match what's on the original invoice; this is to ensure your BAS is correct
- Click Save & Close
- When prompted, select Retain As An Available Credit and click OK
The Customer will now have a credit waiting to be applied to the outstanding invoice.
- From the Customers Menu, choose Receive Payments
- Select the Customer in the Received From field
- Select the outstanding Invoice and click the Credits button, select the Bad Debts Adjustment Note you’ve created and click Done. You will be returned to the Receive Payments window
- Ensure the Adjustment Note has been applied to the Invoice correctly and click Save & Close
You have now accounted for the Bad Debt in QuickBooks. To check that it has gone through you can open a Profit & Loss report or a Tax Summary report.