Bad debts - cash

Robyn CozensRobyn Cozens Member Posts: 6

I know this has been asked before but the answer was unclear to me. Does the way you handle a bad debt change between cash and accrual, if so what do I need to do for cash to clear the outstanding invoices

Comments

  • Kris_WilliamsKris_Williams Member Posts: 1,217 ✭✭✭

    If you write off an invoice as a bad debt I shouldn’t think it would make any difference, the invoice will be paid off so to speak so GST will be included, but the expense of the bad debt will also include GST so will negate the invoice GST

    treatment of bad debt is the same for both methods

  • Acctd4Acctd4 Accredited Partner Posts: 938 ✭✭✭

    Just an additional note - If you're on a Cash basis, you'll only be paying income tax (& GST) on payments actually received.  Therefore - although to you it's a "Bad Debt" in that the good/services have been provided but you've not been paid for them - a "Bad Debt Expense" is only claimable as a tax deduction for an accrual-based business (which are usually larger/company entities).

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    Reckon Accredited Partner (AP) Bookkeeper * Regd BAS Agent (No: 92314 015) *

    ICB-Certified Bookkeeper * Seasonal Tax Consultant since 2003

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    0422 886 003

    [email protected]

    https://www.accounted4bs.com/

  • Robyn CozensRobyn Cozens Member Posts: 6

    Thanks Shaz that was my thought - so what is the best way to handle it so that I can clear those pesky invoices (and keep a record of them) without altering the books

  • Acctd4Acctd4 Accredited Partner Posts: 938 ✭✭✭
    edited October 20

    You can “Void” them instead (with invoice open, right-click & select “Void Tax Invoice” from pop menu)

    This keeps the invoice detail but removes the $ values (I usually enter the original $ amount as a note in the Description for later reference 😊)

    Shaz Hughes Dip(Fin) ACQ NSW, MICB

    Reckon Accredited Partner (AP) Bookkeeper * Regd BAS Agent (No: 92314 015) *

    ICB-Certified Bookkeeper * Seasonal Tax Consultant since 2003

    Accounted 4 Bookkeeping Services

    Ballajura, WA

    0422 886 003

    [email protected]

    https://www.accounted4bs.com/

  • Kris_WilliamsKris_Williams Member Posts: 1,217 ✭✭✭

    The only time voiding will be an issue is if the invoices are in the previous financial year and final accounts have been lodged on an accrual basis. This is the most common way to do financials even when on cash basis for GST

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