Writing off bad debt

When I first went to write off an A/R balance as bad debt, my first instinct was to do it through a journal entry.  However, I found that if you do it through a journal entry, the amounts won’t “zero out” on the A/R Aging Report.  In other words, the original debit balance will still show in the aged column and the credit balance that you just posted through the journal entry now appears in the “current” column.  QuickBooks has a great Help section and this is how the write off should be handled:

1. If necessary, first create an account for Bad Debt in your Chart of Accounts.
2. Record the bad debt by doing the following:

• Go to the Customers menu and click Receive Payments.
• Select the name of the customer from whom you incurred the bad debt.
• Leave the amount field at 0.00.
• Click on the line item that will not be paid to highlight it.
• Click Discount & Credits.
• Your bad debt expense account should already appear in the Discount Account field on the Discounts tab.
• Enter the amount of the bad debt in the Amount of Discount field.
• Click Done in the Discount and Credits window.
• In the Receive Payments window, save and close the bad debt transaction.

941 Tip

Do not pay your payroll liabilities from the “Write Checks” window. If you use this window, Quickbooks will warn you to use the “Pay Liabilities” window, but will let you write the check. However when you print the 941, it will not reflect any payments that you made using the “Write Checks” window. Use the “Pay Liabilities” window to create checks for all tax liabilities. Using this window will ensure that the payments are reflected accurately on the 941 report and that your liability accounts are properly reduced.