I have some bad debts to write off for a client that uses Quickbooks . According to the QB help, you raise a Journal entry to Accounts Receivable, at gross value, naming the Customer to post the write off to, and then post the debit to the Bad Debts account at net value, with the VAT going to the input VAT line. This clears the Accs Receivable side, puts the cost to the bad debt account, and the VAt to the input VAT. When I then run the VAT Return for the quarter this journal has been done, I expected to see just a reduction in input VAT side, thus lowering any VAT the client had to pay by the amount of bad debt VAT I'd posted. However, the journal entry is shown in the input section as expected, but there is now an invoice restated in the output vat, with the date the journal entry was made. The result is that the VAT figure for the quarter has not changed, as the two values contra each other out! Can anyone out there explain what I am doing wrong? (I hate Quickbooks! Sage is so much more logical!!!)
I've never used QB but would you be able to simply raise a credit note for the debtor and post it to bad debts instead of sales? (you would need to reverse the journal though) or in the journals, is it like Sage where it defaults to T9 and you would need to change to T1? Sorry probably not a lot of help here am I!
I would do a credit note like Rob said and make sure the VAT code is the correct one, I have 2 set up on QB's one for 15% and one for 17.5%. the 17.5% is the default one. when you raise a credit on QB it will ask if you want to use it against an invoice is you say yes it should allocate it to the invoice required, and click SAVE at the end. Then if you go back into the customer account say Joe Bloggs you should see both entries on there ( I think) one for inv, and one for credit. I think this is correct, then the VAT element will automatically be cancelled out on the Vat report, thus not paying VAT on the bad debt.
I've just checked mine as I had a bad debt (only very small amount) but it didn't include VAT as I am not VAT reg, but my Credit note cancelled out my invoice and as I said when you go back into the customers account both will show on there. I think this should be OK, but like I say I don't have the Vat element to deal with.
You can always go into the VAT 100 report afterwards and click on the Sales VAT that will open up all the transactions for that VAT period and check to see if its on there?
I have found QB support in the past not that good, they are not accountants or bookkeepers and only call centre operatives.
Hope that helps. A
-- Edited by Amanda on Tuesday 16th of March 2010 07:23:30 PM
I had to do one of these just this morning! I did it via a journal entry and it seemed to work ok.
Example:
Net amount £20.00 VAT £ 3.40 Gross £23.40
Journal as follows:-
In Entry No. put Bad Debt
Cr Accounts receivable £23.40 Enter name of customer Dr Bad debts £20.00 Enter HMRC under the name and under VAT item make sure you select the same VAT rate as the original invoice (eg VAT 17.5% on sales) Dr VAT Ctrl (or Liabiliity) £3.40 HMRC will be selected and again under VAT item make sure the same VAT rate as the original invoice is selected.
Save and Close the journal. Hopefully the VAT return will now be correct and the invoice will be cleared from your customers account.
The result is that the VAT figure for the quarter has not changed, as the two values contra each other out!
