Write off Bad Debt, Uncollectible AR
To write off an invoice, I would recommend the following steps:
- Create an expense account on your Accounts List for Bad Debt/Write-offs (or something similar)
- Create a new item called Bad Debt/Write-offs that links to the bookkeeping account you created in Step 1 and enter $0.00 as the price so you can change it per invoice.
- Go to the invoice that you are unable to collect on. Click Edit Invoice. Add a line to Item section in the body of the invoice and select the Bad Debt item you created in Step 2. Change the amount from 0.00 to the amount of the invoice and be sure to make the amount a negative by entering the minus sign in front of the amount, i.e., -10.00. This should bring the balance of the invoice to 0.00. Click Save Changes.
Exceptions: if items on the invoice are taxable, be sure to make the bad debt item taxable too so that the tax liability is also reversed.
Your Bad Debt expense account will now be increased but the write-off and your AR (and sales tax liability, if applicable) decreased by the appropriate amounts.