Accounting, Bookkeeping, and QuickBooks Tips for Small Businesses

Posts tagged QuickBooks Tutorial

QuickBooks Tutorial: How to Write Off Bad Debt in QuickBooks





Yes, it’s an unfortunate part of doing business. Occasionally you will have those stinky customers who refuse to pay for the products and/or services your business sells. After you have exhausted all possibilities of trying to collect payment from your nonpaying customer (called them, emailed them, mailed past due statements, charged late fees, offered to work out a payment plan, etc) you realize they are not going to pay. You can write this off as Bad Debt and get the sale off of your books in 2 simple steps.

IMPORTANT – There are several ways to write off bad debt in QuickBooks. However, the way I’m about to show you is the ONLY way to adjust your sales taxes payable liability account (if applicable to your business). Even if your business does not collect sales tax, this is a pretty easy way to write off bad debt and I highly recommend it.

Step 1:
Click on the Reports menu and select Customers & Receivables from the drop-down menu. Then choose the Open Invoices report. This report will show you all the open invoices you currently have (customers who owe you money). Find the customer you want to write off. Write down the customer’s name, the noncollectable invoice number, and the amount due.

Step 2:
Next, go to the Customers Menu or go to the Customer Center located on your main home screen. From there select Create Credit Memos & Refunds. The Credit Memo window will open.

  • Enter your customer’s name, choose the date you want to write off the invoice, and leave the credit memo number alone (QuickBooks will automatically assign that number for you).
  • Choose the “Bad Debt” Item. You will want to have an Item specifically set up for Bad Debt. If you don’t have one, you will need to set one up.
    • If you need to create a new Item, click Add New, select Other Charge, the Item Name can be Bad Debt, in the description box you can type in Bad Debt or Noncollectable Funds, and then for the account select your bad debt expense general ledger account. Click OK to set up the new Bad Debt Item.
  • In the description box, I like to reference the invoice number we are writing off. It’s not required, but it makes it a lot easier to go back if you ever need to quickly reference what invoice number you wrote off. You can simply put “unable to collect invoice #…”.
  • The amount will be the amount of the invoice you are unable to collect and want to write off your books.
  • If you are using QuickBooks’ class tracking feature, select the appropriate class.
  • Sales Tax – If your business tracks Sales Taxes Payable, this is where you will adjust your sales taxes payable account. Please note, there are various ways to write off bad debt in QuickBooks, but using a Credit Memo is the ONLY way to adjust your Sales Tax Payable account.
  • Click Save and Close.
  • A new window will open informing you that you have a remaining balance on this credit. QuickBooks will want to know if it can help you apply it somewhere else, offer a refund and help you write a check (i.e. customer overpaid), or apply the credit to an invoice. Select the Apply to Invoice option.
  • Find the invoice number you are writing off, check off that invoice number, and click done.
  • Your invoice has been written off. Meaning it will no longer show up as an Accounts Receivable on your Balance Sheet and will appear on your Income Statement as an expense (bad debt expense). This expense is used to reduce your income since you are unable to collect this sale.

Free Tip!
I recommend double checking your work. This is a great way to make sure you wrote off your noncollectable invoice correctly.

  • View your Open Invoices report again (step 1). The invoice you just wrote off should no longer appear on the Open Invoices report.
  • If you look at your Balance Sheet, your Accounts Receivable will be reduced by the amount of the invoice you just wrote off.
  • Your Income Statement will report an expense line for Bad Debt. This expense should equal the amount of your uncollectable invoice.

You’re good to go! That is the correct way to write off bad debt (noncollectable invoice) in QuickBooks.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle Edwards, CPA is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and Virtual CFO solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, home brewing, quilting, and hanging out with her family.


Top 3 Benefits to Correctly Recording Credit Card Charges into QuickBooks

How to Posting Credit Card Charges into QuickBooks

The other day I wrote a guest blog about “Entering Credit Card Charges into QuickBooks, the Right Way!”. One of my main goals working with clients is to teach them the correct way to use QuickBooks. QuickBooks is a great tool for small business owners, but you must know how to use it. In my guest blog post, I taught you the best way to record your credit card payments in QuickBooks. Today I’d like to talk about the top 3 benefits to using this method to record your credit card receipts into QuickBooks.

  1. Always Know How Much You Owe!
    If you are good about keeping up with your bookkeeping tasks and recording your credit card charges as they occur, you will always know the balance on your credit card. This avoids surprises when your monthly credit card statement arrives and helps you plan for your upcoming cash outflows.
  2. Accurate Financial Statements!
    Let’s face it, quite a few small businesses do not have the luxury of paying their credit card bill in full every month. This method for posting credit card charges into QuickBooks, allows the small business owner to choose the credit card transactions to pay this month and which ones will have to wait until next month to pay. QuickBooks will keep track of the amount still owed and the transactions still owed to your credit card company. Thus providing you an accurate accounts payable figure on your balance sheet.
  3. Save Time!
    The third benefit for posting credit card charges correctly to QuickBooks allows the small business owner the opportunity to quickly look up transactions. Let’s say you’re trying to figure out how much you typically spend at the big box retailer for office supplies. By recording the credit card charge to the correct vendor, you can quickly pull up that big box retailer and figure out how much you spent. This saves a ton of time over scrolling through every single credit card payment looking for those office supply charges. Some bills have them, some do not, and now you’ve just wasted a ton of time searching for these charges. Let’s face it, which small business owner does not love to save time!

There you have it. The top 3 benefits to using the correct way to post credit card charges to QuickBooks. Not only does it allow you to plan for your upcoming cash outflows, it provides business owners with accurate financial statements, and best of all it saves time! Give it a try and let me know how you like using this QuickBooks tip!



Check out my QuickBooks Tutorial about “Entering Credit Card Charges into QuickBooks, the Right Way!”..



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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.


QuickBooks Tutorial: How to Prepare 1099 and 1096

Tax Return_Form 1099Jan 31st is just around the corner. That means you only have a few days left to prepare and send your 1099’s. Last week we discussed 1099’s – what is a 1099, who gets a 1099, and when 1099’s are send/received. This week I want to walk you through how to prepare 1099’s using QuickBooks. Don’t forget your 1099’s must be mailed to your vendors no later than January 31, 2011.

The quickest and easiest way to prepare your 1099’s is by using QuickBooks’ 1099 and 1096 Wizard. The QuickBooks 1099 and 1096 Wizard provides you with 4 steps to easily verify your information, review your data, and double check that your numbers are correct before printing your 1099’s.

To access the QuickBooks 1099 and 1096 Wizard, click on the Vendors menu and choose the Print/E-file 1099s… option. The wizard will open and will suggest you take the following steps:

  1. Review Your 1099 Vendors – The Vendor 1099 Review report is helpful so you can verify that the vendors who should be receiving a 1099 are marked “yes” and to double check that the vendors marked “yes” have a Tax ID number and a complete mailing address.
  2. Map Your Accounts to Boxes on 1099 – This window allows you to select the account (general ledger account aka chart of accounts) you want to be reported on the 1099’s. You can assign multiple accounts to each 1099 box category, but you can not assign the same account to multiple 1099 categories. You will also want to verify the threshold (minimum) amount you must report to the IRS matches the current IRS rules.
  3. Review Your 1099 Data – The 1099 Summary Report opens, providing you with the opportunity to see each vendor that is eligible for a 1099 and the amount paid to that vendor. Please note the report is sorted by Box Number (which box the amount will be reported in on the 1099). You can double click any vendor to see the details behind the total amount showing on the report. If you notice a check or bill was originally posted to the wrong account (i.e. it’s not showing up on the 1099 or it’s being reporting in the wrong box), you are able to go back and change the account on the the check or bill. I recommend printing a copy of the report. It is a good tool to double-check all 1099 vendors are included.
    Additional Steps to Ensure 1099 Reporting Accuracy

    1. First, open Quickbooks’ 1099 Details report. To access the 1099 Details report, go to the Reports menu and select Vendors & Payables. Then click on the 1099 Detail option to open the report. Make sure the report dates are correct, choose the “All Vendors” option, and the “Only 1099 Accounts” option. Refresh your report. Look into any vendors that show up on your QuickBooks 1099 Details report that do not show up on your QuickBooks 1099 Summary report. If you find vendors who are supposed to receive a 1099 – open their vendor record and click the Form 1099 button on the Additional Information tab and verify you have their Tax ID Number and mailing address.
    2. Secondly, in the QuickBooks 1099 Details Report change the 1099 Options to: “Only 1099 Vendors” and “All Allowed Accounts.” This new version of the 1099 Details Report allows you to verify the amount you are reporting on the 1099. If you find any vendor payments that were accidentally posted to the wrong account, you can double click the listing to open the transaction to change the account. After making the change, refresh your report to make sure the amounts match.
    3. Once the vendors and amounts have been verified for accuracy, you are ready to print your 1099’s.

  4. E-file and Print on Plain Paper OR Print on Preprinted Forms
    1. QuickBooks 2011 is the first version that gives you the option to file your 1099’s electronically through QuickBooks. Click the Use Intuit 1099 E-File Service button to proceed to file your 1099’s electronically. Note: if you file your 1099’s electronically, you do not need to file a 1096. Another nice feature is that you are able to print your vendor’s copies on plain paper, so you do not have to worry about buying and printing on the preprinted forms.
    2. To print your 1099’s and 1096 on preprinted forms, click the Print 1099’s button. This will walk you through printing your 1099’s and 1096 on preprinted forms. Preprinted forms can be purchased at most major office supply stores (i.e. Office Max) or ordered for free from the IRS. Printed Form 1099’s and Form 1096 will be filed with the IRS by mail.

Keep in mind most 1099’s need to be mailed to your vendors by January 31st and then filed with the IRS by February 28th, 2011.

Additional Resources
Instructions for Form 1099-MISC (2010).

Form 1099-MISC (2010)

Instructions and Form 1096 (2010)

A Guide to Information Returns

Information about the FIRE System (electronic filing)

Form W-9

Who Can Help You File 1099’s
If you get stuck or have questions, contact the IRS, your lawyer, or your CPA.

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Michelle Edwards, CPA - QuickBooks Consultant Written by Michelle Edwards, CPA
Certified QuickBooks ProAdvisor

Michelle is the owner of Trailhead Accounting Solutions CPA, LLC, an Erie, CO based CPA firm focused on providing small and mid-sized businesses with day-to-day accounting, bookkeeping, and business solutions. Michelle is a CFO turned consultant who loves working with small businesses and entrepreneurs. When she’s not crunching numbers, she can be found hiking, remote camping, gardening, quilting, and hanging out with her family.

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