How to write off bad debt in Accounts Receivable Sage 50 Accounting

There are times when a user might want to write off outstanding transactions within an account, for example, if a customer has not paid an invoice and the outstanding balance grows into a bad debt, or if you wish to tidy up an account by writing off the small overpayments. In order to make the needed postings quickly and accurately, if you are using the Standard VAT or UK Flat rate VAT scheme you can use the Write Off, Refund and Returns wizard.

Once you write off a transaction or an account, the balance transfers to a bad debt control account, which appears on the Profit and Loss report as an overhead. Likewise writing off a bad debt also minimizes the debtors or creditors figure within the Balance Sheet and the customer or suppliers balance is thus, adjusted likewise.So How to write off bad debt in Accounts Receivable Sage 50 Accounting? Let us take a look:

Solution to Write Off Bad Debt in Accounts Receivable in Sage 50

There are some cases when the customers will not pay money owed, and the accounts receivable must be written off to bad debt expense. Let us take a look at the two methods to write off bad debts.

• Direct Method: Every invoice that is a bad debt is posted on to Bad Debt Expense (an expense account) once the bad debt is recognized.
• Allowance Method: A certain percentage of your accounts receivables is written off periodically or at the end of each fiscal year. The amount that is then written off depends on the percentage of bad debt that you believe your company incurs throughout the year. Generally, you would make a General Journal entry affecting an accounts receivable, that is used as a contra-asset account titled "Allowance for Doubtful Accounts" and Bad Debt Expense, which is an expense account. Later, every invoice is written off to Allowance for Doubtful Accounts as the bad debt is recognized.

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In order to write off an invoice/s whether partially paid or not paid at all in Accounts Receivable as a bad debt, follow the steps below.

1. Decide on the method you wish to use to write off bad debts.
2. Next locate the customer and invoice number to be written off as a bad debt.
3. Go to the Tasks menu
4. Now select Receive Money. Here, Sage 50 displays the Receipts window.
5. Next, enter or select the customer ID linked with the invoices you wish to write off as bad debts. In order to display a list of existing customers, type ? in this field, or select the Lookup option. At this point the Sage 50 will display the outstanding invoices that are due.
6. Next, enter a check/reference number that will help identify the write off, for example, WO-001.
7. WithIn the Cash Account list, enter or select a Bad Debt expense account or an Allowance for Doubtful Accounts account. This will create a debit to that account.
   TIP: In case you have the Hide General Ledger Accounts global option activated, then in this case the Sage 50 will not display the Bad Debt expense account in this window. You will see only the latest list of cash accounts. In order to use the Bad Debt expense account here, click Journal and change it in the Accounting Behind the Screens window.
8. Within the Apply to Invoices tab, click select the Pay check box next to the invoices you want to write off as bad debts. This will credit the Accounts Receivable account that was originally associated with the invoice.
   NOTE: If the Hide General Ledger Accounts global option has not been activated, whatever the last used account was in the Cash Account field will continue to default all over again until it is changed, even after the Receive Money window is closed and reopened. In case you do not change it back to your normal cash account, all Receipt transactions after the bad debt write off will continue to debit the Bad Debt Expense account or Allowance for Doubtful Accounts account. It is recommended to Save the receipt to record the write off and clear the customer balance.

Conclusion

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FAQs For write off bad debt in Accounts Receivable Sage 50 Accounting

Q. How can one write-off a bad debt?

A. In order to do so, you need to:

• Go to the list in the Customer box
• Now select the customer whose debt will not be paid.
• Within the Invoice Number box, enter the original number of the unpaid invoice, followed by the letters "WRTOFF".
• WithIn the Amount column, enter the amount owed as a negative number.

Q. How can you account for a bad debt write off?

A. Using the allowance method, one can predict that you will not  receive payment for credit sales from all your customers. Hence,you can debit bad debts expense and credit allowance for doubtful accounts. If  there is a bad debt, in this case you will credit accounts receivable and debit allowance for doubtful accounts.

Q. How can you record bad debt expenses within Sage?

A. In order to  write off the entire invoice

• Start by typing the complete amount of the invoice.
• WithIn the GL Account field, enter the general ledger account number for bad debt expense, and enter the amount to be written off as a negative amount. 
• Now Click Accept, and then click the Print button to print and update the Cash Receipts Journal