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Experienced User
Elsie81
Posts: 46
Registered: ‎12-04-2011
Australia
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Accepted Solution

Journal Entry for Bad Debts

I need to write off some customers invoices' as bad debts but the invoices have been paid off in MYOB so they are showing on my bank rec (and so I can't do the preferred way of writing off bad debts which is to apply a negative sale).

 

I have done the following journal entry, and I just want to confirm whether it is correct:

 

Credit - bank account, tax code N-T

Debit - trade debtors, tax code N-T (so I can reconcile the bank acct, as we never received payment for them)

 

Credit - trade debtors, tax code GST

Debit - Bad debts (expense acct), tax code GST (to reduce tax liability already paid, and write off debt)

 

Is this correct?

 

Regards,

Lisa

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Super Partner
Marilyn
Posts: 827
Registered: ‎11-01-2007
Australia
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Re: Journal Entry for Bad Debts

Hi Lisa,

 

I am in holiday mode, so maybe off the mark but if you have marked off the sale as being paid and you have not actually been paid, why not delete the payment, raise a negative sale to bad debts then apply this sale to the outstanding invoice.

 

By doing this the payment leaves the bank reconciliation and you won't have to do a journal entry

 

cheers

MARILYN AMESBURY
Amesbury Consulting
MYOB Certified Consultant
MYOB Accredited Trainer
Certificate IV Assessment Workplace & Training
Phone & Fax:: 02 9773 1411
Mobile: 0408 73 1411
Milperra NSW 2214
Email: marilyn@amesburyconsulting.com.au
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Experienced User
Elsie81
Posts: 46
Registered: ‎12-04-2011
Australia
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Re: Journal Entry for Bad Debts

It is actually quite a number of sales that are from 2010 that have been paid off, and total in the thousands (they were paid off by management, I don't know why. It may be to do with the fact that we have two systems where the info is exported into MYOB from another).

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Trusted Partner
AndrewWhite_CPA
Posts: 40
Registered: ‎20-12-2010
Australia

Re: Journal Entry for Bad Debts

Hi Lisa,

 

Without prejudice - before you go down the path of writing off all these bad debts, have you confirmed from your source software that all these are actually correct.  I get concerned when I hear that total bad debts are in the '000s.

 

As to your original request.

From your information and presumably imported transactions MYOB looks a little like this:

 

Recognition of Sale (past event)

DR Debtor Control A/C (consists of multiple individual credit sales(customer) accounts)

CR Sales

CR GST Collected

 

Receipt/Write-Off Event

DR Bank

CR Debtor Control A/C (multiple - see above)

 

Presumptions:

That the individual "customers" have "paid" to a bank account (actuality they should be written off)

That you do not have a doubtful debts and/or bad debts provision account

That you do not have the capacity/time to reverse the transactions and enter a bad debt transaction

 

Solution:

The quickest, simply

CR Bank/Whereever the funds where receipted to (N-T)

DR Bad Debts Expense (GST)

 

This write-offs across three lines:

against funds receipted (again presumption here is Bank)

against Sales on P&L

against GST Collected on Balance Sheet

 

This method of course does not identify the individual credit sale transgressions, which is not ideal, but you may be getting that information from your third party software.

 

If you have any queries please contact me

 

 

 

 

Andrew White CPA
Financial Control and Management
PO Box 7055, Hawthorn North, VIC, 3122
+61 3 8376 6550

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Experienced User
Elsie81
Posts: 46
Registered: ‎12-04-2011
Australia
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Re: Journal Entry for Bad Debts

Hi Andrew,

 

I was advised by my bosses that these amounts are to be written off for reasons unknown to me. I did the entry as per the solution you suggested and reconciled my accounts for the week, however management has since deleted my journal entry so now my bank recs are out for the following week. I have to wait until my manager is back from holidays to rectify the situation.

 

Thanks for your information, it was very helpful.

 

Regards,

 

Lisa

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Contributing User
Astha
Posts: 37
Registered: ‎26-09-2011
Australia
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Bad Debts on Cash Basis

Hi,

 

  I have some confusions regarding the deductions of bad debts of the company reporting on cash basis.

  Can the deduction of bad debts be claimed in such situation?

  If someone could provide assistance would be grateful.

 

 

Thank you!!

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MYOB Moderator
Leeya
Posts: 824
Registered: ‎18-05-2011
Australia
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Re: Bad Debts on Cash Basis

Hi Astha

 

We have written a support note on Writing off Bad Debts.

 

As stated in the support note: "Using the method described above, a bad debt won't affect the GST where the GST is reported on a cash basis. This is because GST collected is only reported once the payment has been received from the customer. Since the customer never paid the invoice, no GST would have been reported."

 

I hope this answers your question.

Regards,

Leeya
MYOB Client Support

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Contributing User
Astha
Posts: 37
Registered: ‎26-09-2011
Australia
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Re: Bad Debts on Cash Basis

Thank you for providing information.

As per infomation , when a company(Reporting on cash basis) is lodging its tax return at the end of the financal year, it is not allowed to claim the deduction of bad debts.Is it ?

 

Cheers!!

Astha

 

 

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