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PromisedLand
January 24, 2024
Question

where should bad debt show up in P&L report

  • January 24, 2024
  • 2 replies
  • 0 views

The QB help page says bad debt shows up as an expense in the P&L report. It did not do that for me.

 

After applying credit memos to unpaid invoices, the bad debt showed up as negative 'Service Income Revenue' which is the top level revenue category. The original invoices appear as paid with positive revenue in a P&L revenue subcategory.

Overall, the net revenue is correct because both positive and negative revenues for the unpaid invoices cancel out. 

 

I followed the directions on the following QB help page to create the bad debt expense category and create and apply credit memos to unpaid invoices, https://quickbooks.intuit.com/learn-support/en-us/help-article/customer-refunds-credits/write-bad-debt-quickbooks-online/L88pSKtr9_US_en_US

 

My concern is that bad debt did not appear as an expense in the P&L report as the QB help page said. Is the QB help page wrong? 

2 replies

R
Rasa-LilaM
January 25, 2024

Hello there, PromisedLand.

 

Proper tracking of transactions is vital when running a business, including uncollectible amounts. This helps keep you on top of your financial records. Let's work together so you can see the bad debt expense in the Profit and Loss statement. 

 

The bad debt reserve or bad debt allowance is recorded on the Balance Sheet. While the Profit and Loss report reflects the relevant amount of bad debt expense. 

 

The accounting method and date used can impact the data displayed on your reports in QuickBooks Online (QBO). It paints a different picture depending on the method or date range you select. You'll have to set the correct information in the report to show the bad debt expense.

 

Here's how:

 

  1. Open the Profit and Loss report, click the Report period drop-down, and select the correct date range.
  2. In the Accounting method section, choose Cash or Accrual.
  3. Tap the Run report button to view the changes. 

This reference provides insights into how each accounting basis works: Choose between cash and accrual accounting methods in QuickBooks Online.

 

Aside from that, check the account used for the bad debt. Make sure that you've selected the correct  Account Type and Detail Type.

 

You can also use the Customize function to focus on the details that matter the most to you. For specific ways to refine your reports and which one to run, the following resources outline the complete steps to carry out the task:

If you need further assistance navigating QBO or have additional questions about financial statements and bad debts, leave a comment below and tag my name. I'm more than happy to respond to them. Have a good one, PromisedLand.

Rainflurry
Rainflurry
January 25, 2024

@PromisedLand 

 

"After applying credit memos to unpaid invoices, the bad debt showed up as negative 'Service Income Revenue' which is the top level revenue category."

 

You must have a 'Service Income Revenue' selected as your income account on your bad debt item.  You need to select your Bad Debt Expense account under 'Income account' on the non-inventory product set up.  See Step 3, #4 from the link you sent.

 

  

 

U
userkyle
October 3, 2024

My Bad Debt expense is still showing up in a cash basis P&L Report. Since it's not a cash expense, shouldn't it be excluded on the report?

Rainflurry
Rainflurry
October 3, 2024

@userkyle 

 

Unfortunately, QB isn't that smart.  Bad debt only applies to accrual basis accounting and QB cannot remove both the invoice and related bad debt expense when switching between cash and accrual basis reports. If bad debt is on your P&L, then you're using the accrual process to clear the uncollectible invoice.  If you're on cash basis, you can use a credit memo that hits the same revenue accounts as the original invoice or zero out the original invoice.  If you use both cash and accrual basis for internal reporting, then the credit memo is a better option IMO.  

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