How To Write Off Bad Debts In Quickbooks Enterprise, Pro, Premier? | 1-866-292-4631

By | July 30, 2018
  Bad debts simply mean those funds that are unrecoverable. And if an individual knows that he would not get this
amount, then they record it as a ‘Bad Debt’ in their accounting sheets. However, several methods are there
to handle bad debts.
NOTE: Suppose, you are using accrual basis as accounting method, please consult with your accountant
for more information, if both conditions given below are suffered:-
– If, allowance method is not used
– The written amount has high gross sales percentage in the year in which it has been written off List of methods:
1. Cash Basis Method
2. Direct Method
3. Allowance For Bad Debts Method
4. Setting up Allowance For Bad Debt System

    CASH BASIS METHOD
If you file your taxes on a cash basis, the best way to clear the amounts that are uncollectible and those amounts that are due is to get invoices void as they have not been recorded as income.
To get your invoices void, Deleted :
– First of all, choose Invoicing/Sales from the left-hand side menu
– Now, press Customers option from the top of that window
– Select customer name from these
– After then, choose option saying “Open Invoices”  from the drop-down menu titled as Show
– From the Dates drop-down menu, pick your date range
– Now, you are required to select each and every invoice whose payment is not recoverable each one at a time
– Choose More than VOID, when you have invoices appeared on the bottom left corner
– Click on ‘YES’ as confirmation pop up appears
– After then, select and delete every invoice that is bad debt
– After getting invoice voided, please reopen and put “BAD DEBTS” there in the memo,  where “VOIDED” is written
and then save it
You may also select Product/Service item and add negative sum for the total invoice. In case, any sales tax is
is applied, convert it to nontaxable and then amount and at last save it. If invoices are paid partially by the customer:

– Fist, go to Invoices
– Add a new line in invoice by applying main product service
– Now, convert description to Bad Debts
– In the Amount column, put the due amount on invoices
– In the Memo field, write off Bad Debts
– In the end, save it

To create a note about clients entity as a bad debt:
– Choose Sales/Invoices option from the left-hand side
– At the top of the window, choose Customers Option
– Now, insert Customer’s name in that option
– Along with customer name, also write a Bad debt
– After then, save it

DIRECT METHOD
 
If writing off this particular amount has a direct effect on your gross sales amount, get it consulted with
your accountant before you make an entry.
Before moving further, please ensure that you have created Bad debt a/c.
To Create One:
– Click on the gear Icon located at the top of your screen and then select Chart of accounts
– Click on NEW at the top right of the display
– From Category type, select Expenses
– From Detail type, select Bad Debts
– Now, write Bad Debts in place of Name
– Click on Finish at the end  For Creation of Product item known as Bad Debt:-
– Click on the Gear icon located at the top of your screen, and then choose product services
– Click on New, from the top right
– Select Non-inventory as a type of item
– After then, add a name to it
– Choose ‘BAD DEBT” in the field saying INCOME ACCOUNT
– Now, save it

Allotting a Credit Memo to a Client:
– Tap on Plus (+) icon from the top of credit memo
– Use Bad Debt and put that amount you wish to ‘Write off’ as a positive number
– In the MEMO field, write Bad Debt
– Save it at the end

  Applying Credit Memo:
– Click on plus (+) icon for receiving payment i.e at the top of your screen
– Now, choose your customer name
– At the bottom of the form, all open transaction must be checked, if all are checked, please save it

ALLOWANCE FOR BAD DEBT
If you already have an a/c that is being used as Allowance for Bad Debt, and you want to add a
bad debt a/c, you may enter credit memo and journal entry too.For Creation of a credit Memo:
Initially, you have to create a product service item that can be used as an allowance for bad debt:
– Tap on gear icon located at the top and then select Product and Services
– From the top right, click on New
– In Name field, enter Bad Debt
– In Account field, choose Allowance for bad debt
– After then, save it

Create a credit Memo:
– First, click on Plus Icon (+) at receive payment
– In Customer field, write down the name of the customer
– For Product field, choose Bad Debt
– In the amount column, enter the amount written off as bad debt
– Save it at the end To apply Credit Memo :
– Click on the plus icon (+) above Receive payment
– Choose the name of the customer
– All  the transactions must be rechecked, at the bottom of the form
– After then, save all of them

Creating a journal entry:
– Click on plus icon (+) appearing at the top of the journal entry
– Now, write down the dates

!!For the first line:

* Account-       bad debt account allowance
* Debit-         amount to be written off
* Memo-          To write off the bad debt-customer name

!! For the second line :

* Account-        receivable a/cs
* Credit- the Auto-populating amount
* Memo-           auto-populating as well
* Name-           Name of client
– In fields asking for Memo, put both of the memos discussed above.
– Now, save it.
– Perform every step above to apply credit invoice

SETTING UP ALLOWANCE FOR BAD DEBT SYSTEM
Tax filing and reporting must be done on an accrual basis while setting up the allowance method.
To Create  Bad Debt A/c Expense:-
– Select gear icon and then click on chart of accounts
– Click on option – NEW i.e at the top right corner of your screen
– For category type, choose Expenses
– For Detail type, choose Bad Debts
– After then, save itTo create an allowance for bad debts account:
 – Click on gear icon then choose Chart of accounts option
– Click on New, from the top right corner
– In category type, select Expenses
– In Detail type, select Bad Debts
– Then, save it

Creating journal entry for recurring bad debt expenses
– Click on Gear Icon at the top and then go to recurring transactions
– From the top right corner, select New
– Journal Entry – Transaction type
– Press OK
– Bad Debt – Template
– Enter time intervals in Schedule
For line 1:
Account  –            Bad Debt account
Debit    –            Amount of Bad debt estimated in a month
Memo     –            Expected Bad Debt
For line 2:
Account –     Bad Debt Allowance
Credit  – the Auto-populating amount
Memo    –     Auto Populating as wellEnter both of the memos discussed above in the field asking for ‘Memo’ In case you need help then call us on Quickbooks Enterprise Support 1-866-292-4631 and you can also visit us on find a proadvisor.

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