Writing off Bad Debt in Accounts Receivable

Occasionally businesses find themselves in the position of writing off client invoices that will never be paid. These instructions will help you do this within QuickBooks Online.

These steps are set up and will only be performed once.

Set Up the Item “bad debt” in QuickBooks Online:

  1. Click on accounting on the left side of the screen
  2. Click on chart of accounts
  3. Click on new in the upper right hand corner
  4. Change the account type to income and name the account bad debt
  5. Click save and close
  6. Click on the big gear icon in the upper right hand corner
  7. Click on products and services under the column called lists
  8. Click on new
  9. Click on service
  10. Name this service Bad Debt
  11. Change the income account from income to bad debt
  12. Click save and close

Write Off the Bad Debt in QuickBooks Online

  1. Click on the plus sign (quick create) in the upper right hand corner
  2. Click on credit memo under the column called customers
  3. Select or enter the name of the customer whose invoice(s) is being written off
  4. Choose Bad Debt as the product / service
  5. Enter the amount being written off into the column for rate
  6. Click on save and close
  7. Click on the plus sign (quick create) in the upper right hand corner
  8. Click on receive payment under the customers column
  9. Select or enter the name of the customer whose invoice(s) is being written off
  10. Check the box that corresponds to the invoice(s) being written off
  11. Check the box for the credit memo you just created
  12. Scroll up and confirm the dollar amount in bold is zero, if it is not, change the amount received to zero dollars
  13. Click save and close

Click here to download these instructions as PDF

Click here for a link to the QuickBooks Online sample file / sandbox