This article describes how you can identify bad debts, then write off outstanding balances that you do not expect to recover. If you later receive payment for a written off debt you can then write back this amount and process the receipt


You should check with your accountant to ensure you are following correct processes in identifying and dealing with bad debts

TABLE OF CONTENTS


Identify

Identify the bad debt – you may already know the details but you can also run these reports to identify bad debts:


    • Reports > Debtors > Credit Management Report – tick for 90 days then use this report to check the individual debtor
    • Reports > Debtors > Aged Trial Balance – Summary to identify the customers then run Aged Trial Balance – Detailed just for that customer


Write off

Once you have identified the bad debt that you need to write off then go to that debtor (click on Debtors) and select Journal.


In this example I need to write off a bad debt for ABBOT/C:

Journal



1. Select the appropriate date
2. Type of Journal is AD- which will enter a credit amount on the account (reduce the debt)
3. Enter in an appropriate reference.
4.GL Code – if you use SAM Elite then select the appropriate expense account (your code may be different to this example).


Ask your accountant if you are unsure which GL code to use


Please phone us for help on how to set up a GL code.

If you use SAM Lite, Workmate or Supermate this field will not display.
5. Check with your accountant to clarify if GST is applicable to this transaction.
6. This is the total (inclusive amount) you are writing off.
7. Enter a relevant comment that will help you identify the transaction in the future.

Click OK and the journal will display on the customer’s account.

Note that the debtor balances in the top right show balances in Current and 90 day


Credit match the transactions

The balances in the top right are now zero and nothing is outstanding on the debtor account.


Be prepared!  Your accountant will most likely ask about bad debts when preparing financial reports/tax returns - so keep a note/paperwork about bad debts written off or written back


If a Bad Debt is later Fully or Partially paid

If a written off bad debt is later fully or partially paid then this is how you can process it in SAM:

For this example – an invoice for $1993.35 was written off some years ago and the customer is now paying $1000 toward the invoice - How lucky! If only this would happen in real life!!


Journal 

As above when writing off the debt go to Debtors and find the customer then click Journal:


1. Select the appropriate date
2. Type of Journal is AD+ which will enter a debit amount on the account (increase the debt)
3. Enter in an appropriate reference
4.GL Code – if you use SAM Elite then select the appropriate expense account (your code may be different to this example).


Ask your accountant if you are unsure which GL code to use


Please phone us for help on how to set up a GL code.

If you use SAM Lite, Workmate or Supermate this field will not display.


5. Check with your accountant to clarify if GST is applicable to this transaction
6. This amount is the total amount that has been recovered/now being paid
7. Enter a relevant comment

 

Click OK and the journal will now display on the account – note the debtor balances in the top right and Balance on the account


Post a Receipt

Now process the receipt using the relevant Payment Type and credit match


Balances are now zero:







 

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