Most businesses will, at times, have to write off some invoices as bad debt. While no one likes to do it, at least Peachtree makes it easy.
Peachtree’s prescribed method, as outlined in the help, is very simple. You just go to the Tasks menu and choose Receipts. Except for 2 fields, you will enter everything just like you would if you were receiving payment for the invoice. The first difference is the Reference field. Since you don’t have a check number, you will need to enter something else. It can be anything up to 20 characters, but something like “Bad debt write off” or “W/O-001” would be typical. The second and most important difference is the Cash Account field. You need to change it to your bad debt expense account. This will cause bad debt to be debited instead of cash. If you have turned on the option to hide GL accounts in accounts receivable, you won’t be able to select anything other than an actual cash account in the Cash Account drop down list. In this case, you will need to click on the Journal button at the top of the Receipts window. There you will be able to change the cash account to your bad debt expense account. Check the Pay box next to the invoice you are writing off and click the Save button. When you click Save you may get a warning that says “You have selected an account type that is not typically used for the Cash account on this transaction. Do you want to save the transaction with this account anyway?” Click Yes to save the transaction as you have entered it.
One caution is that the Receipts window remembers the last cash account that you used. So I strongly recommend that when you are done with your write-offs, you either enter a regular receipt, or open an existing receipt and resave it. This will set the cash account back to your regular bank account.
If the invoices you are writing off involve sales tax, and your state allows you to recover sales tax on bad debt, you will want to modify the normal procedure so that it reduces your sales tax liability. You will still write off the invoice through the Receipts window. But with this method you do not need to change the cash account. Select the invoice(s) you need to write off, then click on the Apply To Revenues tab. Here, enter a description on the first line if you want. Change the GL Account to the Bad Debt account. Set the Tax column to taxable and enter the taxable amount of the invoice (not the invoice total) as a negative in the Amount column. If part of the invoice was non-taxable, enter that amount as a negative on the next line. Set the Tax column on this line to exempt and enter account number for Bad Debt Expense in the GL account. Make sure the same sales tax code is entered at the bottom of the receipt as was used on the invoice. Peachtree will calculate the negative tax. The amount on the Apply To Revenues tab should now exactly offset the amount on the Apply To Invoices tab so that the total amount of the receipt is zero. Click the Save button to record the transaction.
