How to Create Bad Debt Expense in QuickBooks Desktop

This article addresses how to create a Bad Debt Expense entry in QuickBooks Desktop.

A Bad Debt Expense is simply an Accounts Receivable debt obligation that a customer owes you for previous services or products sold to that customer.

If a customer seems like they will be unwilling to pay this debt obligation to you, then you might be able to go ahead and write off this obligation in your books, therefore it will be ultimately erased from your Accounts Receivables.

Utilizing a Bad Debt Expense entry is mostly helpful when you are recognizing your income on an accrual-based accounting method; this is because the corresponding unsettled receivable (the invoice) was also recognized as income under this accrual-based accounting method.

So, if you choose to go ahead and utilize a Bad Debt Expense entry, there are different ways of handling this in your books; here is one method utilizing the QuickBooks Desktop software (Please Note: You will need to first create a Bad Debt Expense account in your Chart of Accounts if this does not already exist):

1. Open the past due invoice to be written off.
2. Click on Receive Payment button towards the top right.
3. On this Receive Payment screen:
   1. Payment amount should be zero.
   2. Fill in the date field.
   3. Be sure the invoice in the list below is highlighted only(NOT check-marked).
4. Now (still on the same screen) click on the Discounts and Credits button towards the top.
5. Be sure the Discounts tab is selected on the pop-up that opens up.
6. Amounts of Discount should be the full outstanding amount to be written off.
7. Choose “Bad Debt Expense” account from the Discounts Account field list (Again, be sure you do have a Bad Debt Expense account to choose from, if not, then simply create one).
8. Click Done.
9. You will now notice an additional column created called “Discount” (in your list below) and the amount of your Discount should be the same as what you typed in the previous pop-up screen.
10. Click Save and Close.

Verify your work by simply reviewing your invoice as it should be now paid off and also reviewing that Bad Debit Expense account as this discount amount should be posted here.

Note: AccuraBooks is a bookkeeping firm only, so please consult with your C.P.A. for verification and clarification about the contents of this article.