You write off an amount when you have exhausted all reasonable collection or recovery efforts. Common write-off scenarios include: a customer invoice that is more than 12 months old and has not been paid despite repeated follow-up, inventory that has been damaged or has become obsolete, and a deposit or advance paid to a vendor who has shut down without refunding.
Writing off does not mean forgiving the debt legally. You may still pursue the customer through legal channels. It simply means your Zoho Books records no longer show the amount as an asset, preventing your financial statements from being overstated.
There are two approaches. The first is to create a credit note against the customer’s invoice, selecting a “Bad Debt Expense” account as the credit note’s account. This closes the invoice in Zoho Books and posts the loss to the P&L. The second approach is a journal entry: debit Bad Debt Expense and credit Accounts Receivable (or the specific customer’s sub-ledger balance). Both methods produce the same result on the financial statements.
If you have already filed a GST return declaring the output tax on the invoice being written off, the write-off of the principal amount does not automatically recover the GST paid. To recover the GST, you need to issue a credit note (subject to GSTR-1 amendment rules) or, if the conditions under Section 16 of the CGST Act are met for bad debt relief, consult your CA for the correct procedure. Zoho Books records the accounting entry accurately; the GST treatment requires separate attention.
A write-off in Zoho Books is the process of removing an uncollectable customer invoice or a worthless asset from your financial records by posting a journal entry or credit note that recognises the loss as an expense.
Apply a credit note to the unpaid invoice using a Bad Debt expense account, or post a journal entry debiting Bad Debt Expense and crediting Accounts Receivable. This removes the invoice from the Aged Receivables report and records the loss on the P&L.
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