Hey Hey Rhonda Rosand here CPA and
Advanced Certified QuickBooks ProAdvisor with New Business Directions and today
I’m here with a short video about how to write off a bad debt in QuickBooks if
you are using the accrual basis of accounting and you have customers and
you send them invoices for your services you will create an accounts receivable
in your QuickBooks unfortunately not everybody pays their bills and sometimes
you try as you may cannot collect on a receivable and you have to write it off
I’m going to walk you through the steps of doing that today it’s a four-step
process the first two steps are one-time only the last two steps are how you
write off the bad debt so step one is to create an account for bad debt expense
step two is to create an item for the bad debt step three is to create a
credit memo for the amount you’re going to write off and step four is to apply
that credit memo to the invoice I’m going to show you how that is done let
me share my screen here here we are in QuickBooks we’re in a sample company
file of QuickBooks 2018 version step one is to create that I that account in your
chart of accounts so we go to chart of accounts I right click I click new this
is an expense bad debt expense is an expense I’m going to type in here bad
debt expense and I’m going to save and close so step one is done and it’s a
one-time deal back to my home page I’m going to go to items and services I’m
going to create a bad debt item right click click new it is an other charge
bad debt item is an other charge so bad debt here I’m going to copy that and I
am going to paste it into the description I’m going to leave the
amount blank I’m going to go to account and I’m going to type in and choose that
bad debt expense that I created in the chart of accounts
now I have my bad debt item and my bad debt expense in my chart of accounts and
those are the two one time step so step one and step two are done step three is
to write off the bad debt at the end of the year you take a look at your
accounts receivable aging report anyone who you know is not going to pay you is
a bad debt and you write them off so you click on your customer center and we’ve
determined by looking at our accounts receivable aging let me back up and grab
that for you in reports under customers and receivables accounts receivable
aging report we can see who owes us money so that’s where you start
determining where your bad debts are we’ve determined that Karen is not going
to pay us the end of the year we need to write it off we go to the customer
center we find Karen’s five hundred and twenty-five dollars we right click
create credit memo up comes the credit memo we’re going to choose the item for
bad debt and we’re going to write off for five hundred and twenty five dollar
amount and when we go to save and close this it’s going to pop up and it’s going
to say what do you want to do with this credit memo I hope that’s what it’s
going to do that’s what it’s supposed to do yes there we go we have an available
credit what would you like to do with it I would like to apply it to an invoice
and then I click OK it shows me the open invoices for Karen I have it already
check marked click done save and close and now I have written off the bad debt so
again four steps create the account for bad debt expense create the item for the
bad debt as an other charge number three create a credit memo to the customer
number four apply the credit memo to the invoice and voila you’re done you’ve
written off a bad debt if you have questions about QuickBooks or you need
assistance please start with our website at NewBusinessDirections.com if you
need help getting organized or streamlining the process call us it’s
okay we can help