Bad debts are amounts owed to you by customers, which you no longer expect to receive. This tutorial explains how to write off a bad customer debt.
The best way to write off a customer invoice is by entering a customer credit adjustment note with sundry lines. Using sundry lines ensures that your stock levels are not reduced. Writing off a bad debt using a customer credit adjustment note ensures that your Business Activity Statement (BAS) is updated accordingly and you are not over-charged by the ATO for collected tax that was never received.
Note: entering customer adjustments to write off a bad debt will not reduce the GST collected on your BAS.
Before you enter the customer credit adjustment note, please check the following details of the customer invoice you are writing off: invoice date, invoice number, total amount and total tax to write off. If the original customer invoice is comprised of items with GST and without GST, you will need to enter two sundry lines on the credit adjustment note: for GST items and for GST-free items.
Writing off a customer invoice
To write off a customer invoice:
Choose Transactions, Customers, Credit Adjustment Notes, Create.
Enter the Customer Code, Document Number, Document Date and Reference. Note that you can use original invoice number in Reference field.
Choose Section (F4) and select Sundry Line. Enter the details of all items with GST on the original invoice.
Choose Zoom In (F8) and locate the G/L Sales Income account. Change the default account to your Bad Debts general ledger account.
Choose Zoom Out (F8) and choose Accept (F9) to save the line. If the original invoice contains any GST-free items, enter an additional sundry line.
When all the details and totals of the customer credit adjustment note are complete, choose Finish (Esc) and Accept (F9).
Allocate the total amount of the customer credit adjustment note to the original customer invoice then choose Accept (F9).
The following General Ledger postings are generated.
