Accounting for bad debts

When you know that a debt will not be recovered, you need to write it off.

Before you can write off a bad debt, you need to create a Bad Debt expense account in your accounts list. For more information, see ‘Set up accounts’ on page 29).

To write off a bad debt, you need to create a credit sale for the customer.

1	Go to the Sales command centre and click Enter Sales.

2	In the Sales window, click Layout.

3	In the Select Layout window, click Miscellaneous and then click OK.

4	In the Customer field, type or select the customer’s name.

5	In the Description field, type a description of the transaction.

6	In the Acct No. field, select the account for Bad Debts.

If you account for bad debts by posting a provision to an asset account (for example, the Provision for Bad Debts asset account), you can select that account.

7	In the Amount field, type the bad debt amount as a negative number.

8	Click Record.

You now need to apply the credit against the customer’s original open invoice. You do this in the Settle Returns & Credits window. See ‘To apply a customer credit to an open invoice’ on page 88.

Related Topics

■	Credit control

■	Reviewing your sales information

■	Financial control