How to write off bad credit

[Wouter van Marle]

On 16 Jan 09, at 9:18, Cam Ellison wrote:

> Bob Taylor wrote:
>> IANAA also. However, I did take an accounting class many many years 
>> ago.
>> Since bad debts hasn't changed since then, create an expense account
>> called, you guessed it, Bad Debts. I would, offhand, credit Bad Debts
>> and debit the A/P account for this business. I would hope the U.S. IRS
>> still allows these to be deductible!
>>
>>
> Aye.  This isn't a debt, though - it's on the A/P side.  I think he
> actually needs to go through the process: it's not a regular 
> transaction
> where you can simply transfer it from one account to another.  I think
> he tried to do that, but it did not clear the payment from the A/P
> register.  That is, it still shows up in reports.

Exactly... and there is the core of the problems. To clear the report I 
basically need to enter a negative amount, and write that off to an 
expense account.

Closely related: I have another customer who had a claim against me 
(material supplied and paid for, but after arrival quality was poor so 
I have to give them some refund). In this case I have to make actual 
cash payments, even more reason to have them in the customer reports, 
so I can keep track on how muhc I owe them!

Wouter.

>
> Cheers
>
> Cam
>
>
>
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