By Irene Bushnell and Kevin Cumley
Which tricky transactions, you ask? You know, those once-in-a-while transactions that always give you a headache (and you can never figure out or remember how to do), such as recording bad debt, trading receivables with payables, and recording customer down payments. Let’s look at a few of them and discuss the best way to record those transactions in QuickBooks. Recording Bad Debt Unfortunately, there are times when someone doesn’t pay an invoice and we need to write off the transaction as bad debt. No, please don’t take the easy way out and just void the invoice! It’s important for organizations to track bad debt to help manage the finances of the business. The method described below is particularly useful because it creates a document (a credit memo) that accurately describes the written-off receivable.
- Set up an Item called Bad Debt Write-Off. The item can be an Other Charge type and be linked to the Bad Debt Expense account in the chart of accounts.
- Create a credit memo for the receivable being written off. In the credit memo, use the item created above and write notes for yourself about the debt being written off. Be sure to include all the details you may need later on. This leaves a well-documented paper trail for future reference.
- Use the Receive Payments window to apply the credit to the outstanding invoice.
Trading or Bartering Using Accounts Receivable and Accounts Payable Have you ever had a customer who wants to trade what is owed to your company for a service or item you purchased from him/her? If you record such transactions with the method described below, you have a more accurate picture of total income and expenses, even though the net effect on your income statement is zero.