Write Off Bad Debt Using Cash Receipts and a Bad Debt Direct Expense Account
The second method for writing off bad debts is to use a cash receipt to charge the amount to a Bad Debt direct expense account. (You add this account in the Chart of Accounts Info Center.)
This method reflects the same philosophy as Method 1 (Negative Invoice Amount), only the project responsible for the write-off suffers reduced profitability. Instead of reducing the project's earned revenue and billings, this method increases its expenses.
The advantage of this method over Method 1 is that Vision preserves the total amount of billings for the project. You can see how much the project would have earned if the client had paid the outstanding invoice, and you can view (by project) the amount of the bad debt expense.
To write off bad debt using a cash receipt to a Bad Debt expense account, complete the following steps:
- Enter a net-zero cash receipt in the Transaction Center.
- Post the cash receipt in the Transaction Center.