Bad Debt

[kwilson]

I currently have 2 invoices for Preschool Tuition that I need to write off as bad debt. How do I accomplish this? I am using 11.5 version.

[jwdick]

PC is a cash basis accounting system. My understanding of "Cash Basis" is that you show no income until money is received therefore if the invoice is unpaid, you have nothing to write off. Writing off a bad debit only applies to "Accural Accounting" which shows income when the debit is incurred.

[JohnDMeyers]

I am assuming you are referring to Accounts Receivable when you say "Invoices".

In this case, PowerChurch doesn't record AR invoices until they are paid. There is no book entry to compare your "bad debt" entry against.

Therefore, the lack of income is the only record you will have. In other words, if you expected $2,000 in income and $2,000 in expenses, you will end up with $1,800 in income and $2,000 in expenses.

The $200 short fall is because of your unpaid invoices.

[JohnDMeyers]

Sorry, I didn't see jwdick's reply until after I posted my reply.

[kwilson]

Yes, I am referring to Accounts Receivable. We invoiced to students for tuition. They attended preschool but did not pay the tuition and are no longer attending. The person who set up our chart of accounts included an account for Bad Debt. So could I not make a journal entry in fund accounting to show this as bad debt and then delete the invoice? Would that work?

[JohnDMeyers]

What type of account did they create (Asset? Liability? Expense?)

The only way I would want to show it, is as an anticipated income, and as a service whose activities were incurred, but not paid for.

Therefore, if you really want to record this, here's what I would do:
CR 01-4230-000 anticipated income $200
DB 01-5380-000 expenses not paid for $200

Both 4230 and 5380 will close-to 3110, and will "zero-out" at the end of the year. Essentially, this transaction does nothing, in other words, except make an entry for the duration of the current year.