How to handle a "will not pay" invoice in gnucash?

[DaveC49]

Julie Cliffe wrote
>     BadDebt    dr    x.xx
>     A/R            cr        x.xx
> and 2 LotLink transactions, 1 dr and 1 cr.  The Type of the BadDebt
> transaction in the A/R account is "?".

Hi Julie,
The above two splits in the transaction should do exactly what you want and
transfer the bad debt from A/R to an expense account, i.e. you have written
off the bad debt as not collectible.  If you only have the occasional bad
debt then that is fine.  

 If you have a GST or VAT Tax  included in your invoices you may also need
to adjust your GST/VAT accounts for the amount included in the invoice, i.e.
reduce the amount of GST/VAT you pay to the government reversing the
transaction by which the GST/VAT was put into the GST/VAT Clearing account
used to accumulate the amount of GST/VAT owing. 

This would be recorded as follows

Expense:BadDebt       Dr xxx
GST/VAT Clearing      Dr yyy
A/R                                                         Cr xxx+yyy 

Larger businesses  with large credit sales actually estimate their bad debt
losses for a year and create an Allowance for Bad Debts contra account to
their Accounts Receivable which is credited with their estimate of the bad
debts for the year. This is usually adjusted at the EOY to match any actual
bad debts. Most larger businesses use a process called ageing of accounts
receivable to estimate their bad debts (usually monthly)  and use the
results to adjust their bad debts allowance account against the expense
account each month. In this case the balances of the A/R account and the
allowance for Bad Debts accounts sum to give your current A/R  and the above
transaction would be a credit to the Allowance for Bad Debts account rather
than to A/R.






--
View this message in context: http://gnucash.1415818.n4.nabble.com/How-to-handle-a-will-not-pay-invoice-in-gnucash-tp4682331p4682486.html
Sent from the GnuCash - User mailing list archive at Nabble.com.