How to Record a Bad Debt Expense in QuickBooks Online and QuickBooks Desktop?

How to Record a Bad Debt Expense in QuickBooks Online and QuickBooks Desktop?

Business owners prefer to record a bad debt expense for maintaining track of it. Certain business owners put QuickBooks to use when this expense has to be recorded. In this accounting software, Chart of Accounts is used the most for adding an account and then recording the bad debt expense in it. This way is suitable for recording this expense in both QBO and QuickBooks Desktop.

For implementing the Chart of Accounts for entering bad debt expenses in QB, the details can be found in this blog. We have shown how to record a bad debt expense in QuickBooks Online and QBDT with every important step included in the process.

This blog’s outline is as follows:

How Do I Record a Bad Debt in QuickBooks?

In QuickBooks, to record a bad debt expense, you can directly move to Company. Here, you can make use of the Chart of Accounts to pick Account. For adding an account, the New option needs to be selected. Following this, use Expense when you are asked to mention the type of the account. Now, you can hit the Continue button. After this, the user will have to specify the Account Number only when the same is applicable. Then the customer can be chosen for whom the bad debt expense needs to be added.

  • When “QuickBooks” is running, select “Company”.
  • Look for “Chart of Accounts” and enter it.
  • Click on the button available for “Account”.
  • Tap on the “New” option.
  • You will be asked to mention the “Account Type”. Opt for “Expense”.
  • Once the type has been specified, hit “Continue”.
  • In “Number”, your account number has to be entered.

Note: In the above-mentioned step, an account number will be added only when it is applicable.

  • Now, you need to choose “Account Name”.
  • After this, input “Bad Debt”.
  • Select “Ok” to proceed.
  • Head to “Customers”.
  • Press the dropdown to choose “Receive Payments”.
  • Decide which customer is having bad debt.

Note: In this step, the customer needs to be selected from the list given.

  • Pick a line item with respect to this bad debt.
  • To proceed, you have to use “Discounts & Credits”.
  • Click on the field labeled “Amount of Discount”.
  • In the field, mention the total amount of the debt.
  • Press the “Done” tab.
  • Click on the option of “Save & Close”.

As you perform the final step, the window of the transaction will be turned off. Also, the bad debt expense will get successfully recorded.

How to Record a Bad Debt Expense in QuickBooks Online?

For the users of QBO, a bad debt expense can be recorded only when outstanding receivable for an account is known. This receivable can be known by running the report for Accounts Receivable Aging Detail via QuickBooks Online’s Reports menu. After knowing it, you can use the Settings of the software to make an account for recording the expense. Next to making the account, you will have to prepare an item for bad debt and add it to your account. You may choose to prepare a credit memo to keep a note of this expense. Thus, for the expense, you will be able to record the bad debt in QuickBooks Online.

  • Begin by checking the receivable of your account. Select “Reports”.
  • Use “Accounts Receivable Aging Detail” to proceed.
  • Decide the receivable that needs to be added as a bad debt expense.
  • Head to “Settings” of “QBO”.
  • Click on “Chart of Accounts”.
  • Choose “New” for adding an account.
  • Press the dropdown next to “Account Type”.
  • Use “Expenses” from the menu.
  • Tap on “Detail Type”.
  • Click on “Bad Debts”.
  • Write “Bad Debts” in “Name”.
  • After this, opt for “Save and Close”.
  • Now, the account will be added. To add the item to it, select “Settings”.
  • Move to “Products and Services”.
  • Tap on “New”.
  • Choose “Non-inventory”.
  • Click on “Name”.
  • Mention “Bad Debts” here.
  • Using “Income Account”, choose “Bad Debts”.
  • Now, opt for “Bad Debts”.
  • Push the button labeled “Save and Close”.
  • To add a credit memo as a note for the recorded bad debt expense, hit “+New”.
  • Now, opt for “Credit Memo”.
  • Click on the menu for “Customer”.
  • View the section named “Product/Service”.
  • In this step, you need to choose “Bad Debts”.
  • In the column that says “Amount”, mention the amount of the expense for bad debt.
  • Following this, hit “Save and Close”.

This is how you can create an account to record the expense for bad debt as well as add a credit memo for it.

How to Record a Bad Debt in QuickBooks Desktop for an Expense?

Bad debt or the expense for it can be added to QuickBooks by running the Chart of Accounts. COA is available in the Lists option. After this, you can choose Account and press New in it. You will find Expense on the display. Choose it and then tap on the Continue option. Now, you need to assign a name to the account being created. Once you have named it, open Customers and use Receive Payments. Then fill in the fields like Received from and Payment Amount. This is how you can learn how to record a bad debt in QuickBooks Desktop for an expense.

  • In “QBDT”, choose the “Lists” option.
  • View “COA” or “Chart of Accounts”.
  • Open the menu saying “Account”.
  • Tap on the “New” option.
  • Click on “Expense”.
  • Select the “Continue” option.
  • Fill in “Account Name”.

Tip: You may use “Bad Debt” as the name for the account.

  • To proceed, press “Save and Close”.
  • Launch the menu of “Customers”.
  • Go to “Receive Payments”.
  • Look for “Received from”. 
  • In the field, add your customer’s name.
  • Now, write “$0.00” in “Payment Amount”.
  • Click on “Discounts and Credits”.
  • After this, go to “Amount of Discount”.
  • Here, mention the amount that needs to be recorded as a bad debt expense.
  • Via “Discount Account”, choose the account same as Step 3.
  • Press “Done”.
  • Tap on the “Save and Close” option.


This blog explained the details of recording expenses for bad debts in QuickBooks and its various versions. On following the steps in order, your account for bad debt will be made and the expenses will be added to it. For additional guidance, you can connect with us through our comment box.

To continue reading such blogs, check out how to record a security deposit refund in QuickBooks. You can also look at how to record deposits in QuickBooks Online.

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