Write-Offs
Write-OffsWrite-Offs for Clients using Cash Basis Accounting for Accounts Receivable
When you are writing off a balance, the Write-Off Posting Code is essentially making a 'payment' against the outstanding charges to close them out and reduce the outstanding balance on the owner ledger.This means that the Write-Off Posting Code will be the same as your Payment Posting Code, except for the debit GL account:
Posting Code Posting Code Type Debit GL Account Credit GL Account
Write-Off Credit Bad Debt Assessment Income (typically)
All charges 'paid' by the Write-Off are reflected in the income GL account for the charge being written off. You will need to net your income against the Bad Debt loss to see the total of actual cash payments received.
If you do not want to see income from fines, late fees, or similar soft costs in the income accounts, you may want to consider just reversing those charges instead of writing them off. You will probably still want to write-off the assessments and other hard costs, but that is a question that your accountant can better answer.
Write-Offs for Clients using Accrual Basis Accounting for Accounts Receivable
When you are writing off a balance, the Write-Off Posting Code is essentially making a 'payment' against the outstanding charges to close them out and reduce the outstanding balance on the owner ledger.
This means that the Write-Off Posting Code will be the same as your Payment Posting Code, except for the debit GL account:
Posting Code Posting Code Type Debit GL Account Credit GL Account
Write-Off Credit Bad Debt Prepaids
You should not use Accounts Receivable for the credit GL account. Using Accounts Receivable will cause an out of balance on your financial statements. The credit will come out of the Prepaids account and be posted to the Accounts Receivable account when the application of payments process runs.
If you do not want to see income from fines, late fees, or similar soft costs in the income accounts, you may want to consider just reversing those charges instead of writing them off. You would probably still want to write-off the assessments and other hard costs, but that is a question that your accountant can better answer.