Bad debts refer to the amount of money that is irrecoverable from your debtor. Basically, it is the money that generally your customer or someone you lent but can’t be recovered now due to circumstances. It is a loss for a business and should go on the debit side of the profit and loss statement. It is very important to write off bad debts in QuickBooks so that the user knows the true position of the business. The money that your debtors owe is an asset for you and thus, not writing off bad debts will show the asset side inflated. The steps to write off Bad debts in QuickBooks Desktop are different from the Online version.
Do you want to learn how to write off bad debts in QuickBooks Desktop or Online? Contact Asquare Cloud Hosting’s expert team and they will give you detailed guidelines for it.
Methods To Manage Bad Debt in QuickBooks
The primary step to manage bad debts in QuickBooks Desktop and Online is to have a clear picture from the Account Receivable Aging Detail Report. This report tells you which debts are going bad and what you need to write off. Next steps you need to follow are different for both QuickBooks Desktop and Online versions.

How to Write off Bad Debts in QuickBooks Desktop
A new account is required to be created to write off bad debts in QuickBooks Desktop. It has to be an expense account that can be used to manage all the bad debts that occur in business. It is a two-step process:-

Step 1- Create An Account For Tracking Bad Debts
- Go to the Lists menu and choose the Chart of Accounts.
- Now go to the Account menu and click on New.
- Select Expense and then tap on Continue.
- Type in Account Name by which you want to save it, such as Bad Debt.
- Click on Save and Close
Step 2: Clear Unpaid Invoices

- Go to the Customers menu and tap on Receive Payments.
- Type in the customer’s name in the Received from section.
- Go to Payment Amount and enter $0.00.
- Now click on Discount and credits.
- Enter the amount you wish to write off in the Amount of Discount field.
- Choose the account you created in step 1 for Discount Account and tap on Done.
- Click on Save and Close.
Method to Record Bad Debt in QuickBooks Online
The process to record bad debt in QuickBooks Online requires you to set up a separate expense account. This account can be used to record bad debts that occur in user’s business. Then you would be required to create a bad debt item. These are the steps you need to follow:-

Step 1:- Set up an Expense Account for Bad Debts

- Tap on the Settings button and choose the Chart of Accounts.
- Click on New in the upper right corner.
- Go to the Account Type list and choose Expenses.
- Then go to the Detail Type list and choose Bad Debts.
- Enter the name by which you want to save this account in the Name field. Example: Bad Debts.
- Tap on Save and Close.
Step 2: Create an item for Bad Debt

- Click on the Settings button and choose Product and Services.
- Click on New in the upper right corner and then tap on Non-Inventory.
- Enter Bad Debts in the Name Field.
- Go to the Income account list and choose Bad debts.
- Tap on Save and Close.
Step 3: Generate a credit memo for bad debt

- Click on +New button.
- Choose Credit memo.
- Go to the Customer list and choose the customer.
- Go to the Product/Service section and choose Bad Debts.
- Enter in the amount you wish to write off in the Amount section.
- Enter Bad Debt in the Message displayed on Statement box.
- Tap on Save and Close.
Step 4: Apply the Credit Memo You Created to Invoice
- Tap on +New.
- Select Receive Payments under customers.
- Go to the Customer list and select the right customer.
- Go to the Outstanding Transactions section and choose the invoice you created.
- Choose the credit memo from the Credits section.
- Tap on Save and Close.
The amount that was written off will now appear under Bad Debts expense account in the Profit and Loss report.
Learn from Experts How to Write off Bad Debts in QuickBooks
So now we hope it is clear to you how to write off bad debts in QuickBooks Desktop and Online. You should run an Account Receivable Aging Detail Report from time to time. It helps you keep a check on which debtor is on the verge of going bad. If you still have some doubts or are stuck somewhere, feel free to contact an expert at Asquare Cloud Hosting Helpline Number 855-738-0359. Don’t proceed if you are unsure of any step, as it can create problems in your Profit and Loss Statements.