Ways to writing off Bad Debts in Quickbooks | Enterprise, Pro ,Premier

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Writing Off Bad Debts In QuickBooks


Bad debts are funds that are unrecoverable and if you know that you won’t be able to recover that money you write it as a bad debt in your accounting sheets and there are various methods to handle those bad debts.


NOTE: In case you are using accrual basis as accounting method please kindly consult your accountant  for further detailing if these both conditions are suffered:-


  • In case allowance method is not used


  • The written amount has high gross sales percentage in the year it’s been written off


Here is the list of Methods to choose from:-


  • Cash Basis Method


  • Direct Method


  • Allowance For Bad Debts Method


  • Setting up Allowance For Bad Debt System


  • Undoing a Bad Debt entry when a customer pays

QuickBooks Bad Debts



In case your taxes are filed on a cash basis, the best method to clear the amounts that are uncollectible and are those  amount that are due is to get invoices void or deleted as they have not been submitted as income.


In order to get you invoices void,Deleted :


  • From the left hand side menu select Invoicing/Sales.


  • Now select Customers option from the top of that window.


  • Now from these you have to select a name for Customer.


  • Now select the option which says “Open Invoices”  from the dropdown menu named as Show.
  • Now from the Dates dropdown menu select your date range.


  • Now you have to select each and every invoice whos payment is not recoverable  each one at a time.


  • When you have invoices displayed from bottom left corner select More then VOID.


  • When you see confirmation pop up  select YES.


  • Now choose and delete every invoice that is bad debt.


After getting invoice voided just reopen and enter there “BAD DEBTS” in the memo  where its written “VOIDED” and then just save it .


NOTE: If bills have some billable expense, charge, credit, or time charge added on it, because it is not allowed to get void.


You can also choose Product/Service item and add a negative sum for the total invoice. If any sales tax is applied convert them to nontaxable and then amount then and at last save them.


If invoices are paid partially by the customer:


  • Go to Invoices .


  • Now add a new line in invoice by applying the main product service.


  • Convert description to Bad Debts.


  • Under the field of Amount  enter the amount that is due on invoices.


  • In the field of Memo write off Bad Debts.


  • At last save it.


In order to create a note about clients entity as a bad debt:


  • From the left hand side select the option of Sales/Invoices.


  • From the top of the window open Customers Option.
  • Enter Customer name in That option.


  • With the name of that customer also write Bad debt.


  • At last save it.



By Direct Method


In case writing off this particular amount affects your gross sales amount ,please get consulted by your accountant before proceeding further to make any entry.


Before proceeding make sure that Bad debt account is created.


To Create One:


  • Click on the gear Icon that is present at the top of your display and select Chart of accounts.


  • From the top right of the click on NEW.


  • Select the Expenses  from Category type


  • Select the Bad Debts from Detail type.


  • Write Bad Debts in place of Name.


  • At last click on Finish.


For Creation of Product(service) item called bad debt:-


  • Click on the Gear icon At the Top of your display. And select product services.


  • From the top right choose New


  • For type of item select Non-inventory


  • Add a name to it.


  • For the Field which says INCOME ACCOUNT choose ‘BAD DEBT”.


  • At last save it.


For Allotting a Credit Memo to a Client


  • From the top of credit memo click on Plus (+) icon.


  • Use Bad Debt and enter the amount that you are willing to Write off as a Positive number.


  • In the fields of MEMO write Bad Debt.


  • At last Save it.


Applying the credit Memo:


  • From the top of your screen select the plus icon for receiving payment.


  • Select a name for your customer.


  • At the bottom of the form all open transaction must be checked ,in case all are

checked save it.



By Allowance For Bad Debt


If you have a account that is already setted up or already being used as Allowance for bad Debt , and you are willing to add a bad debt account you can enter a credit memo as well as a journal entry.


For Creation of a credit Memo.


First of all it is needed to create a product service item that can use  allowance for bad debt:


  • Click on the gear icon present at the top.and select Product and Services.


  • From the top right  choose NEW.


  • In the field of Name enter Bad Debt.


  • For account field choose Allowance for bad debt.


  • At last save it.


Create a credit Memo:


  • Click on the Plus Icon (+) at the  Receive payment


  • In the field of customer whitre down customer name


  • For Product field you have to  choose Bad Debt


  • Under the section of amount write the amount written off as bad debt


  • At last save it.


For Applying the Credit Memo :


  • Click on the plus icon (+) above the Receive payment .


  • Select a name for the customer.


  • At the bottom of the form , all transactions must be rechecked.


  • Now save all of it.

Creating a journal entry:


  • Click on the PLUS ICON (+) at top of the journal entry.


  • Write down the dates


  • Now for first line:


  1. Account-   allowance for bad debt account



  • Debit-         amount to be written off




  • Memo-        To write off bad debt-Client name



  • For second line :


  • Account-     Accounts that are receivable


  • Credit-         Auto-populating amount
  • Memo-         auto-populating as well
  • Name-          Customer Name




  • In fields asking for Memo enter both of the memo’s  mentioned above.


  • Now just save it.


  • Now follow every step above to get credit invoice applied.


Setting up allowance for bad debt system


Tax filing and reporting must be on an accrual basis  while setting up allowance method.


To Create  Bad Debt Account Expense:-


  • Click on the gear icon and select chart of accounts.
  • From the top right corner of your display select option –NEW.


  • Choose Expenses as a category type.


  • Choose Bad Debts For detail type.


  • At last save it.


To create an allowance for bad debts account.


  • Click on the gear icon and select Chart of accounts.


  • From top right corner select NEW.


  • As category type select Expenses


  • As Detail type select Bad Debts.


  • Finally save it.


By Creating  a journal entry for recurring bad debt expenses  


  • Select the Gear Icon at the top and got to recurring transactions
  • From top right corner choose new
  • Journal Entry as Transaction type.
  • Hit OK
  • Bad Debt as Template
  • Enter time intervals in Schedule
  • For line 1:


  • Account-      Bad Debt account


  • Debit-            Amount of Bad debt estimated in a month
  • Memo-           Estimated Bad Debt




  • For line 2:


  • Account-     Bad Debt Allowance


  • Credit –       The auto populating amount
  • Memo-        Auto Populating as well




  • In the field asking for MEMO enter both of the memos mentioned above.


  • At the end save template  From the bottom.

QuickBooks Bad Debts
QuickBooks Bad debt

For more information you can call QuickBooks Customer Service at 1800 470 6903

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