Write Off Bad Debts
This FAQ will go over how to write off unpaid invoices (Bad Debts) for a customer.
- Go to General Ledger > Journal Entries and click the green plus button.
- Make the first line a credit to accounts receivable for the amount that the customer owes and select the customer’s ID from the dropdown under “Name”.
- The second line should be a debit to the “Bad Debts” expense account. Make sure that the “correcting entry” box for both lines is not checked.
- Post the journal entry.
- The journal entry can now be applied to the unpaid invoice(s) by selecting the invoices from the list that appears after clicking “Post”. Clicking “Cancel” will allow the journal entry to post without applying it to any outstanding invoices.
- Next click “Finish”. This will automatically create a receivable to apply the journal entry and unpaid invoices against each other.
Do note that the journal line going to the bad debt expense account can/should be split between that account (for the invoice total minus tax) and the sales tax account – this adds that tax amount as a credit to the next sales tax report.