In QuickBooks, Bad Debt is nothing but the amount that a company or business is not able to recover from a debtor in case the borrower has gone bankrupt or not able to pay due to some reasons. However, the debt issues can rigorously affect the report of profit & loss during the reconciliation of QuickBooks accounts. If we talk about reasons why having a bad debt account and Write off is necessary in order to avoid discrepancy in your income statement or reports of profit and loss. To explore more about Write off Bad Debt in QuickBooks continue reading this guide as it discloses all the relevant information regarding the same.
Writing off Bad Debt in QuickBooks Online
Businesses like Finance Companies Orphan make sales on credits are required to manage a separate for individual bad Debt account in order to write off bad debt that cannot be recovered or collected. You can even clear the invoices from the account receivable by writing off bad debt that helps you to get the accurate profit amount in QuickBooks Help Support Phone Number.
Let’s check out further details on the write off Bad Debt in QuickBooks. First, we’ll start with creating then setup, and then implementation. The below-mentioned steps will clear your query or its related concerns:
● First, go to the Gear icon from the Company section and then select the option “Chart of Accounts”
● Next, you have to select the tab to create a new account
● Now, hit the Expense option from the Account Type drop-down list
● After that, go to the Detail Type and select all the Bad Debts from the drop-down list of the same
● In the name field, you have to type Bad Debt
● To end this process, you have to click Save & Close.
Perform the below steps to set up a product/service Bad Debt item in QuickBooks:
● Initially, go to the Gear icon and then choose the “Product and Services” under the Lists option
● Next, click New Product >> Non-Inventory option from the Product/Service information option
● In the Name text box, you have to type Bad Debt
● After that, choose the Bad Debt expenditure which was created previously in the section “Income Account”
● Make sure that unmark the check-box “Is Taxable”
● At last, click Save & Close.
Perform the below steps to set up a Credit Memo for the Bad Debt item in QuickBooks:
● In the beginning, click the Plus icon located at the top of the QB dashboard
● Go to the Customers section and select the Credit Memo
● From the Customer drop-down list, you have to select the Customer
● In the Product/Service field, choose the item that you have created for the bad debt
● After that, type the amount of bad debt or unpaid invoices (make sure that values should be positive)
● Now, locate the Memo Text box inside the Bad Debt amount
● In the end, click the Save & Close button to end this process.
After setting up of Credit Memo for the Bad Debt item in QuickBooks, it is also essential that you should implement the Credit Memo by applying Credit Memos for Credits with the help of the below instructions:
● To begin with, clicking Plus icon that you find at the top of your dashboard screen
● Next, locate the section named “Receive Payment from the Customers”
● Go to the Outstanding Transactions menu and choose the desired invoice which wants to write off
● Select the Credit memo that has recently created under the Credits tab
● Now, run the check and confirm whether the amount reflecting in that particular section should be $0.00
● After verifying make sure you hit the Save & Close option.
Hopefully, this guide clears your all doubts and you’re now well aware of why it is so essential to writing off Bad Debt in QuickBooks. After following the aforementioned steps, you’ll be easily able to create, set up, and implement your debt-related items or data in QuickBooks accounting software. In case, you are still troubling in writing off the Bad Debt then simply seek the QuickBooks Experts assistance via Live Chat to resolve your queries that you’re experiencing while using the software.
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Q1. How do we examine the A/R aging report in QuickBooks?
Ans: 1. Go to the Report section from the left side panel of QuickBooks
2. Look for the Account Receivable Aging report at the top of your search bar
3. Click the Accounts Receivable Aging Detail report to view the outstanding account.
Q2. How to add an expense account in order to track the bad debt?
Ans: 1. Go to the Lists menu and then select Chart of Accounts
2. Go to the Account menu >> New
3. Choose Expense and then Continue
4. Enter Account Name
5. At last, click Save & Close.
Q3. Is there any possibility that Cash basis taxpayers write off the bad debts in QuickBooks?
Ans: No, Cash basis taxpayers are not allowed to claim the bad debt deduction for unrecoverable/uncollectible amounts.