The first step of recording bad debt expense is to add an item to the products and services list for tracking.
Follow these steps to create a bad debt item:
- Click on the gear icon and select Products and Services, as shown in the following screenshot:
- Select the item type, as shown in the following screenshot:
As you can see, there are four item types to choose from. Service is the item type we will use for bad debt expense.
- Fill in the following fields to add bad debt to the items list:
Brief descriptions of the fields to fill in are as follows:
- Name: Enter Bad Debt or Bad Debt Expense in the item name field.
- Description: Enter a brief description of the types of transactions that will be recorded using this item.
- Income account: From the dropdown, select Bad Debts. This should be an expense account on the chart of accounts list. If you did not create this account, click on the drop-down arrow, scroll up, and select Add new to create...
