Bad debt write off

[HIS LM]

Hi Chaps,

I had a customer go bust 18 months ago, what are the accounting entries needed to recover the VAT and clear the Sales ledger and how do I post them, I am using SAGE line 100 if that helps !

Thanks

[Eric Mc]

Sage allows you to write off sales using a dummy credit note process. You go into the customer area and use the Bad Debt Write off facility or alternatively generate a speciific sales credit note. Either will cancel the original sales invoice and reclaim the original Output VAT.

When Sage asks you what Nominal Code to allocate the VAT exclusive value of the Write Off, DO NOT post it to "Sales" - post it to the Nominal Code for Bad Debts Written Off in the Profit and Loss account.

[mybrainhurts]

Then spit and say GRRRRRR in a loud voice....

[HIS LM]

Hi Eric,

Ok so an internal credit note will clear the sales ledger and post the net to bad debt account in P&l, what about the VAT bit will it go to Box 1 output vat or should it be box 4 or does it matter

[Eric Mc]

It should REALLY go in Box 4 - as a Bad Debt is classified as an expense rather than a negative sale. Therefore, the VAT man wants you to show the VAT on the bad debt as Input VAT rather than negative Output VAT.

[HIS LM]

mybrainhurts said:

Then spit and say GRRRRRR in a loud voice....

Tell me about it

Top answer thanks Eric