Writing off a customer invoice as bad debt.
Posted: January 30th, 2012, 6:38 pmWriting off a customer invoice as a bad debt
Two methods are available in C21 for removing a customer invoice from the system, each with slightly different accounting implications. Method 1 is more similar to the use of Customer Adjustments in BPI for recording an invoice as a bad debt in your general ledger.
Method 1
1. Run Sales/Invoices to record a credit memo for the customer,
2. Apply it to the original invoice.
3. In the Item details tab enter a single line that has a Description only (for example, “bad debt”).
4. The qty will default to -1 and you can enter the amount of the original invoice in the price column.
5. The resulting credit memo exactly voids out the original invoice.
6. In the GL distribution tab you can enter an expense account for “Bad debt” or whatever you want. This will credit Receivables and debit the “Bad debt” expense account.
Method 2
1. Run Sales/Invoice Updates.
2. Void the original invoice.
This reverses the receivable and all the income accounts associated with the original invoice, thereby reducing income (and therefore your sales tax liability).
Two methods are available in C21 for removing a customer invoice from the system, each with slightly different accounting implications. Method 1 is more similar to the use of Customer Adjustments in BPI for recording an invoice as a bad debt in your general ledger.
Method 1
1. Run Sales/Invoices to record a credit memo for the customer,
2. Apply it to the original invoice.
3. In the Item details tab enter a single line that has a Description only (for example, “bad debt”).
4. The qty will default to -1 and you can enter the amount of the original invoice in the price column.
5. The resulting credit memo exactly voids out the original invoice.
6. In the GL distribution tab you can enter an expense account for “Bad debt” or whatever you want. This will credit Receivables and debit the “Bad debt” expense account.
Method 2
1. Run Sales/Invoice Updates.
2. Void the original invoice.
This reverses the receivable and all the income accounts associated with the original invoice, thereby reducing income (and therefore your sales tax liability).