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How to Write Off Bad Debt

Question: How would you handle/remove a charge account amount for a person that never intends to pay that you want to write off as bad debt?
 
Answer: To handle this, create a new payment option called Bad Debt (Write Off, etc) and assign it to its own GL (General Ledger) code. This makes it easier to find and tally by using the Cash Receipts by Payment Type report. This will retain all the invoice detail, while letting you keep your books straight.
 
1. Go to Setup, Standard Tables. Selecte the Income / Payment Types tab.
2. Change the selector to Payment Type.
3. Click on Add to enter the following to create the new entry: 
Cash, Account Description & GL Code
4. Click OK to save your entry.
 
Now proceed to your first invoice (in History tab or use F5 Batch Payment to see all for each customer) and select the new entry in the drop list found in the Pay/Post or Batch Payment window.
 
Edit Submitted By: Edgar Bautista on 3/2/17.
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Comments (2) Comments
Comment by Mark Bittinger on Mon, Dec 3rd, 2012 at 12:14 PM
Since we already have this Invoice posted, and have paid sales tax on it, how do I get the amount out of the system? If I pay the amount, even with the "bad debt", it shows as income and does not undo the sales tax.Thanks!
Comment by Mitchell1 Tech Support on Mon, Dec 3rd, 2012 at 4:59 PM
The use of a bad-debt payment type is to keep a record of non-payment by the customer. You are correct that it will show as revenue, since it is technically a payment. If you want to back the charged amount completely out of the system, you have two options: 1.Unpost and delete the invoice. All record will be gone, as well as the charged balance. 2.Unpost the order and change the amounts of the sales to $0. Make a note on the order with the original balances and the reason the order was zeroed out. Repost it, so the history can be referred to.
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