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:
- Click on accounting on the left side of the screen
- Click on chart of accounts
- Click on new in the upper right hand corner
- Change the account type to income and name the account bad debt
- Click save and close
- Click on the big gear icon in the upper right hand corner
- Click on products and services under the column called lists
- Click on new
- Click on service
- Name this service Bad Debt
- Change the income account from income to bad debt
- Click save and close
Write Off the Bad Debt in QuickBooks Online
- Click on the plus sign (quick create) in the upper right hand corner
- Click on credit memo under the column called customers
- Select or enter the name of the customer whose invoice(s) is being written off
- Choose Bad Debt as the product / service
- Enter the amount being written off into the column for rate
- Click on save and close
- Click on the plus sign (quick create) in the upper right hand corner
- Click on receive payment under the customers column
- Select or enter the name of the customer whose invoice(s) is being written off
- Check the box that corresponds to the invoice(s) being written off
- Check the box for the credit memo you just created
- Scroll up and confirm the dollar amount in bold is zero, if it is not, change the amount received to zero dollars
- Click save and close
Click here to download these instructions as PDF
Click here for a link to the QuickBooks Online sample file / sandbox
7 Responses
Thank you!! Straight to the point and so easy to follow your instructions. Made my day 🙂
Thanks! We’re happy to hear this tutorial helped you out 🙂
Hello,
This well explained and easy to follow.
I’m having some challenges though and it might be because I am in Canada and have QBO Canada and it is 2 years following the initial post.
1. The easiest challenges I have found and those were the locations/names of the fields to click on.
2. The second is a questions & because I was a banker by trade – There is no indication of entering disposition on the credit memo or anywhere in the process. Is it not necessary since there should be a good paper trail from the initial document with the disposition in the “MEMO” section of the Estimate/Quote?
3. Section 2 – Write off the Bad Debt in QBO: item 5. In Canada we also need to enter the Sales Tax breakdown and double check that the amounts are the same as the original invoice.
4. Section 12 – We don’t have a “BOLD” amount anywhere and we can not enter zero in the “Amount Received” because we get a “Something is not quite right-you must enter a transaction amount” error.
Will you provide direction please? I have had the most time consuming search.
Thank you
Hi Janice,
Rachel currently works at a bookkeeping office in Ontario so she can definitely help you out with your QBO Canada. She’d be happy to walk you through this using your data file or using the Canadian sample file. You can set up a Zoom meeting with Rachel here, https://www.gentlefrog.com/meeting/ a 30-minute meeting should do it.
-Jess
Thank You!
Quickbooks online help really r e a l l y sucks.
You rock.
Thanks Shane! We really appreciate the feedback and are happy that we’ve been able to help you out.
Quick books Online help really help full ! amazing service. Thanks for your great help.