Advice on Recording Bad Debts

V5 Question
1

Hi All,

I’m looking for some advice on the best way to record bad debts associated with customer credit accounts that we are writing off.

Currently, when a customer pays their account via bank transfer, we use a document type on the accounts screen to move the amount to the ‘bank’ account.

For bad debts, I’m considering creating a new account type called ‘Bad Debt’ and setting it up similarly. This would allow me to clear the outstanding account while also recording the write-off properly in our accounting software.

Does this align with best practices, or is there a better way to handle it? I’d appreciate your input on the most effective approach.

Thanks in advance!

2

You can create account type called Expenses and then create an account called Bad Debt or Write off

You can create transaction to move funds from Customer Account to Bad Debt, and since Expenses are generally Debit in nature this will represented correctly in your balance sheet

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