In the case where no payments having been made
- Determine original invoice/s amount and the amount of GST that the debt contained.
- Reverse any Interest that may have accrued as this has not been collected and is not part of the original Debt.
- On the Account Admin Screen click the Add Interest button
- Date = The date you want to write the debt off
- Statement Text = ‘Interest Write Off’
- Interest Amount = negative the amount of interest accrued
- Issue a new ‘receipt’ with the following settings…
- Click the Adjustment radio button – This changes all the General Ledger Accounts to ‘312 – Bad Debts Written Off’
- Receipt Reference = ‘Bad Debt Write Off’
- Issuing and Posting Date = ‘The date you want to write the debt off (Usually the 31st March)’
- Received from = ‘Written Off’
- In the Direct Deposit Field enter the balance of the account or click the ‘<Bal’ button to the right.
- If you are on a payments basis for GST you can safely change the GST Rate to 0.00.
- Click Accept
- If you are on an invoice basis for GST or did not change the GST rate of the adjustment: Goto the Journal Entry Screen and issue a Journal Entry with the following settings..
- Reference = ‘J1′ or BadDebts
- Name = Bad Debts GST Written Off’
- Entry Date and Posting Date = ‘same as above’
- 1st General Ledger Line = ‘312 – Bad Debts Written Off’ and Credit = ‘the amount of GST in the bad debt’
- 2nd General Ledger Line = ‘502 – Goods and Services Account’ and Debit the same amount of GST in the bad debt’
- Click Accept
Note: The Inland Revenue Dept requires that each Debt determined as Bad and ‘Written Off’ be recorded in a minute to that effect in the company’s Minute Book and such processes completed prior to the 31st March (or
balance date of the trading entity).