How to Write Off Bad Debt in QuickBooks
                     How to Write Off Bad Debt in 
QuickBooks?
QuickBooks might be one of the most sophisticated and 
popular business accounting software at the present and the 
application which rules the space of business utilities in the 
virtual world, but it certainly cannot counter or replace all the 
nitty-gritty of the business that takes place in the real world. 
One of the harsh realities for business owners is bad debt. 
Occasionally when an organization has done everything they 
possibly could to get their payments back and remained 
unsuccessful in doing so, then they have to write them off as 
debts.
This blog will guide you in getting bad debt off the back of your 
financial accounting software by giving you step-by-step 
information about how to write off bad debt in QuickBooks.
What is bad debt and why you 
should write them off in 
QuickBooks?
Bad debt is the amount that a company or business fails to 
recover because the person, group, or company that has taken 
the debt cannot pay the debt for some reason or has gone 
bankrupt. When you are reconciling the accounts in 
QuickBooks, then issues related to debt can have 
consequences on the profit and loss reports as well as sales 
and income statements of a company.
There are some businesses such as that of finance companies 
where sales are made on credits and there is a need to have a 
separate bad debt account. When bad debts are written off in 
QuickBooks only then will the invoices get cleared from the 
account receivables and you will get the accurate profit 
amount in QuickBooks.
What are the steps to write off 
bad debt in QuickBooks?
Step 1-Examining the Account Receivables Aging 
Report
Use the Accounts receivable Ageing Details report to check 
the receivables or invoices which are bad debt. For this follow 
these steps-
• From the Reports menu, open an Accounts Receivable 
Ageing Detail Report.
• Examine those outstanding accounts receivable which 
should have been written off.
Step 2- Creating a Bad Debt Account
• For this, go to settings and choose Products and Services.
• Click on New and then on non-inventory.
• Write “Bad debts “in the Name field.
• Click on Bad Debts, click on Income Account.
• Lastly, click on Save and close.
Step 3 - Setting up a bad debit item
• Firstly, go to settings and click on products and services.
• Click on New and then on Non-Inventory.
• Now enter “Bad debts” in the name field.
• Choose the Bad Debts option from the Income account.
• Press Save and close.
Step 4- Creating a credit memo
• Click on New and choose the Credit note option.
• From the Customer drop-down menu, click on Customer.
• Click on Bad Debts in the product/service column.
• Provide the amount to be written off in the amount field.
• Now in the box displaying “Message displayed on the 
statement “, click on “Bad Debt”.
• Click Save and close.
Step 5 - Implementing the Credit Memo to an 
Invoice
• Click on New.
• From the customer's option, click on Receive Invoice 
Payment / Receive Payment.
• Choose the right customer from the customer dropdown.
• Select the credit note from the credits section.
• Click on Save and Close
Step 6 –Running a bad debts report
An Account Quick Report can be executed to review the 
receivables tagged as a bad debt.
• First, go to settings and click on Chart of Accounts.
• Select Run Report from the Action column of the bad debts 
account.
We hope that using the information and the resolution 
mentioned above, a bad debt account can be set up in 
QuickBooks, reports could be run efficiently and all the 
bad debts and unpaid invoices can be easily viewed. 
You may now continue to successfully run your business 
without fiscal disparities caused by bad debts.
Source: 
Dancing Numbers