How to Record a Bad Debt in Balabook:

When a customer doesn’t pay their invoice, and you want to write it off as bad debt, follow these steps to remove the balance from Accounts Receivable and reflect the loss properly in your accounts.

Create a Bad Debt Expense Account:

1. Go to Chart of Accounts.
2. Click 'Add Account'.
3. Choose Expense as the account type.
4. Name it "Bad Debt Expense" (or similar).
5. Save the account.

Create a Clearing Account:

1. In the Chart of Accounts, click 'Add Account' again.
2. Select Bank as the account type.
3. Name it "Clearing Account".
4. Note: This account does not represent a real bank account it’s only for internal bookkeeping.
5. Save the account.

Record a Payment on the Invoice:

1. Open the unpaid invoice.
2. Click 'Record Payment'.
3. Set the payment amount to the unpaid balance.
4. For the payment method, select the Clearing Account you created.
5. Save the payment.

Create a Journal Entry to Write Off the Debt:

1. Go to Journal Entries.
2. Create a new journal entry with the following lines:
   - Debit the Bad Debt Expense account with the same amount.
   - Credit the Clearing Account with the same amount.
3. Save the journal entry.