How to write off Bad Debt?

In business at time we may not receive the money which is due from our clients. This may occure due to many reasons. In process of accounting, we need to give effect to the debtors which are no more good i.e. the receivable is not colletable. It is called as bad debt.

In ProfitBooks, one can record Bad debts in following 2 ways.

1. Settlment of Invoice
On each invoice which is unpaid, there is a circle button. This feature allows users to record the uncollectable amount on the invoice. For Ex. an Invoice of USD 100 is paid USD 80 and the balance amount is not possible to collect, then balance USD 20 can be recorded with the settlement button. As a prior step, you can create Bad Debt Account from Chart of Account under Indirect Expenses.

This account will populate under the list of accounts against which you want to settle the invoice.

2. Journal Voucher
A simple and most commonly used way to record bad debt is use of Journal Voucher. Please go to Accounting > Journal Voucher menu and record the bad debt. You need to debit "Bad Debt" Account and Credit the respective Customer with the amount which is no more collectible.

In this way the bad debt can be recorded easily.

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