26-09-2011 01:18 PM
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?
Solved! Go to Solution.
26-09-2011 01:58 PM
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
26-09-2011 02:13 PM
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).
28-09-2011 12:32 PM
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 GST Collected
CR Debtor Control A/C (multiple - see above)
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
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
06-10-2011 12:26 PM
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.
19-03-2012 02:26 PM
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.
21-03-2012 02:43 PM
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.
21-03-2012 03:19 PM
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 ?
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