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Entering payments after making a journal entry for bad debts?

Forum|Forum|4 years ago
June 28, 2022
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We have a customer that went through a contractor that we have realized is not going to pay on their balance. Accounts receivable shows it as being 170 days overdue. We'd like to make a journal entry that moves the amount to a bad debts expense. However, after making the journal entry, every time we go to accept a payment from the contractor for other jobs, this one pops up and is in the way. Once we change it from accounts receivable to an expense, shouldn't it go away from the customer invoicing system in QBO?

QuickBooks Online

Best answer by EthanDale

I was able to figure it out on my own, since that article you quoted is really out of date.

For anyone coming here later, here is the actual solution.

Products/Services is hidden from Credit Memos by default. Go to Settings > Account and Settings > Sales, and in there, turn the switch ON for "Show Product/Service column on sales forms."

Then, create a credit memo, enter in the invoice # of the invoice you want to mark as a bad debt, and enter in the amount. Under Products/Services, set it to be Bad Debts. Then save and close it. It will automatically link the credit memo to your invoice. You do not need to "apply" the credit memo through a new payment. Go check your P&L (Income Statement) report and you'll see that the amount is now under Bad Debts instead of Accounts Receivable.

J

JamaicaA

Good day, @EthanDale. I'll make sure you're able to keep your accounts updated and manage bad debts in QuickBooks Online (QBO) accordingly.

The accounts reflected in your journal rely on the account assigned when you create or add the product and services included on the invoice. Since you’ve mentioned that the bad debts still pop up when you make a payment, you’ll want to review the process of recording them into the program.

If you haven’t created a bad debt expense account, please follow the steps below:

Go to the Gear icon and select Chart of accounts.
At the upper right, select New to create a new account.
From the Account Type ▼ dropdown, choose Expenses.
From the Detail Type ▼ dropdown, select Bad debts.
Enter Bad debts in the Name field.
Click Save and Close.

Next, let’s create a non-inventory item to hold the bad debt.

Go to Gear icon and select Products and Services.
Select New, and then Non-inventory.
Enter Bad debts in the Name field.
Select Bad debts on the Income account ▼ dropdown.
Tap Save and Close.

We can use the expense account we created to track the bad debt to close the customer's unpaid invoices. See the Step 4 - Step 5 of this article for the detailed steps: Write off bad debt in QuickBooks Online.

Please let me know if you have more questions regarding the process. If you have any other concerns with business accounts or transactions, I'll be right here to help you out again. Take care.

E

EthanDaleAuthorAnswer

I was able to figure it out on my own, since that article you quoted is really out of date.

For anyone coming here later, here is the actual solution.

Products/Services is hidden from Credit Memos by default. Go to Settings > Account and Settings > Sales, and in there, turn the switch ON for "Show Product/Service column on sales forms."

Then, create a credit memo, enter in the invoice # of the invoice you want to mark as a bad debt, and enter in the amount. Under Products/Services, set it to be Bad Debts. Then save and close it. It will automatically link the credit memo to your invoice. You do not need to "apply" the credit memo through a new payment. Go check your P&L (Income Statement) report and you'll see that the amount is now under Bad Debts instead of Accounts Receivable.

AlcaeusF

Hello @EthanDale,

I have reviewed the solution you’ve shared and it's correct and accurate. Thank you for sharing your inputs to help address the issue.

We love to see members supporting one another! Have a great day.

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