To write off Bad Debt:
- Create a new Inventory Item (if you don't already have one) that's called "Bad Debt Write Off". Check the "I sell this item" box and use 6-1800 - Bad Debt Expense - for the income account. NOTE: if you are already showing a Bad Debt item in your inventory, you will need to confirm that it is linked to the 6-1800 account before using it.
- Open your Sales Register and click on the Returns & Credits tab.
- Click the "New Credit Memo" button to create a credit memo for the amount you are writing off to Bad Debt.
- Date the credit memo in the current period.
- 'Return' will be 1 and the item will be the 'Bad Debt Write-off' item you just created. Enter the total amount of the write-off and it will convert it to a credit balance. Click record.
- In the Sales Register, select the Returns/Credits tab. You will now see a credit record for this associate. Select the credit record so it's highlighted. Select the 'Apply to Sale' button at the bottom of the screen. Apply the credit to all open invoices that need to be written off.
- Make sure the amount applied and the credit amount are the same.
This clears the open invoices and increases your Bad Debt Expense, which will be reflected on the Balance Sheet (A/R - Agents) and Income Statement (Bad Debt Expense).