Bad Debts

The amount not paid when a customer fails to pay all or part of what is owed. A bad debt is a cost of selling on credit and is considered an expense. Any sales invoice that cannot be collected may have to be written off.

Writing off bad debts increases the Bad Debts Expense and the ITC Adjustments accounts, and decreases the Accounts Receivable account. If you use QST or PST, it also increases the ITR Adjustments account or the PST Payable account.

Be sure to review the payment terms and credit limit of any customer with bad debt. If necessary, modify the customer's record.