Hi,
I need to write off an amount that will never be paid. Generating a “bad debt account” as a checking account takes care of the invoices that will never be paid, showing zero balances, but then it looks like I’m having those amounts in the bank. Obviously, that’s not correct.
What is the proper way of doing it?
Thank you.
You would have expense account named Bad debts. Then record a journal entry that will debit Bad debts and credit customer accounts receivable account.
In other words, whatever customer owed you will be moved from Assets to Expenses.
If you don’t want to create a journal entry. Create a credit note for the customer and use Bad debts expense account.
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