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How Do I Record Bad Debt in QuickBooks

How Do I Record Bad Debt in QuickBooks?

Giving credit to clients is a part of running a business. Unfortunately, there are some cases in which a client is unable to make payments on their overdue debts. So, fear not! Your quest for ‘How do I record bad debt in QuickBooks?’ is solved in this article!

Here is an explanation of the steps involved in recording bad debt in QuickBooks to guarantee a quick and easy process:

Open a Bad Debt Expense Account

To track bad debt expenditures in QuickBooks, you need to have a separate account. This is how to make one:

QuickBooks Online

  • Go to settings.
  • Navigate to the Chart of Accounts.

Select Bad Debts (or a preferred name) from the Detail Type dropdown.

  • Enter a descriptive name (e.g., Uncollectible Accounts Expense)
  • Click Save and Close.

QuickBooks Desktop

  • Navigate to Settings and then Charts of Accounts.
  • Go to Account > New.
  • Click Continue after selecting Expense.
  • Click Save and Close after entering ‘Bad Debt’ or a name that sounds close.

Document the Negative Debt

Depending on your desire, there are two primary ways to report bad debt in


Credit Memo

This technique creates a credit memo that immediately lowers the customer’s account balance.

  • Open QuickBooks Online by going to Customers > Credit Memos or QuickBooks Desktop by going to Sales > Credit Memos.
  • Choose the client with a bad debt.
  • Select the generated expenditure account or “Bad Debts” from the list of available products and services.
  • In the amount area, enter the amount of the bad debt.
  • In the memo section, write a concise statement such as ‘Writing off bad debt.’
  • Choose to Save or Close and Save.

Accept Discounted Payments

This approach uses the current invoice and reduces it by the amount that has been written off.

  • Open QuickBooks Online. Select Customers > Receive Payments or QuickBooks Desktop by selecting Sales > Receive Payments.
  • Choose the client that owes you money.
  • Either type in the invoice number or choose it from the list.
  • Enter $0.00 as the payment amount.
  • Select Credits and Discounts.
  • In the Amount of Discount area, enter the amount of bad debt.
  • In the memo area, provide a remark such as ‘Writing off bad debt.’
  • Choose to Save or Close and Save.

Important Reminder

Regardless of your approach, ensure you have the proper paperwork to back up the bad debt write-off. This contains:

  • Court documents
  • Correspondence logs
  • Collection efforts

Get in touch with our QuickBooks & Bookkeeping services.

The Bottom Line

So, now you know the detailed solution to ‘How do I record bad debt in QuickBooks?’.

Follow these procedures while recording bad debt in QuickBooks. You can keep accurate financial records and portray a fair image of your company’s financial health. Minimize future bad debt issues by implementing efficient credit management procedures and routinely reviewing your accounts receivable.