Bad Debts are written off when the debts become irrecoverable during the course of the financial year.
- If you need to make provisions for bad debts (a fair estimate of the debts which are likely to become irrecoverable in future financial year), you should also write-off any debts, which are irrecoverable, since these calculations should be based on the good book debtors accounts.

- Bad Debts are usually written off in the General Journal. Since bad debts are a loss or expense for the business, it will reduce the net profit (or increase the net loss) of the business, you need to keep documentary proof (letters of demand, etc.) of the attempts to recover the bad debts.

This is also necessary, if you are registered for VAT/GST/Sales Tax, and you have to write-off bad debts for debtor accounts on which you already have paid Output Tax to the Tax Authorities.
- Before you may write-off bad debts for debtor accounts on which Output Tax was paid to the Tax Authorities in a previous Tax period, you need to create a Tax code (sub-account) in the Edit→Accounts→Tax Account menu option.

In these cases, you need to write-off the bad debts to clear the Debtors Account with the amount of the irrecoverable debts (Inclusive of VAT/GST/Sales Tax), debit the bad debts expense account (exclusive of VAT/GST/Sales Tax) and debit the bad debts Tax code with the VAT/GST/Sales Tax amount.

The VAT/GST/Sales Tax amount needs to be submitted on the VAT/GST/Sales Tax return - Tax on Adjustments (block 17 for South African based Users), which will reduce the amount payable to the Tax Authority.

1. Identify the Debtor Accounts, which are irrecoverable, and check whether you have sufficient documentary proof of attempts to collect the debt. (This should only be done after all avenues have been exhausted).
2. If you are a registered VAT/GST/Sales Tax vendor, identify the Interest amount and the VAT/GST/Sales Tax amount of the Output Tax already paid to the Tax Authorities in a previous Tax period.
3. This VAT/GST/Sales Tax amount may be for a full amount of a Tax Invoice, or a number of Tax Invoices, or it may be for outstanding amounts, if the debtor has made some payment on the Tax Invoices.
   The reason for this is to double check and make sure that the amount of the VAT/GST/Sales Tax is correct.
4. Write-off the Bad Debts in the General Journal.

To Write-off Bad Debts in the General Journal:

1. Click on the Batch Entry icon, or click on the Input→Batch Entry menu option.
   - Keyboard Access: Press the F2 key on your keyboard. Alternatively, press the Alt+I+B keys on your keyboard.
   The Batch Type Selection screen will be displayed.
2. Select the General Journal.
3. Click on the Open button. The Batch Entry Transaction screen for the General Journal is displayed:
   
   - If no contra account or if any other account than the Bad Debts (Expense Account) is displayed on the Batch Type selection screen, you need to set up the options for the batch. If you have not yet set the General Journal, or if your requirements should change, click on the F10: Setup icon, or press the F10 key on your keyboard.
   - Note that for the Writing-off of Bad Debt transactions, the Amount Entry field should be set to credit.
   You could also generate a Debtor Statement or an Age Analysis report to check and calculate the VAT/GST/Sales Tax amount for those Debtor Accounts. An example is as follows:
   
   
4. Enter and / or select the following:
   1. Reference number - Enter the Reference number you allocate to the write-off of Bad Debt transaction (it may in some cases refer to your authority number if authorised by the owner or manager, etc.).
   2. Date - Enter or select the date of the transaction. This may be the date on which the writing-off of bad debts was approved.
   3. Description - Enter a brief description for the transaction.
      - You need to enter a sensible description to describe the nature of the transaction.
      
      
   4. Account - Select the applicable account to which you need to allocate the debit or the credit transaction.
   5. Tax Account - If you are registered for VAT/GST/Sales Tax, select the Bad Debts Tax code.
      - This needs to be entered on a separate block (block 17 on the South African Revenue Services VAT return).
      
      - This is only applicable if Output VAT/GST/Sales Tax was charged on the original transaction and if you are registered as a VAT/GST/Sales Tax Vendor. If no VAT/GST/Sales Tax is applicable to the transaction, select the No Tax code.
      
      - You may also select to hide the Tax column, and lookup facility in the Setup Options for the General Journal, if no VAT/GST/Sales Tax is applicable to all transactions in this batch, or if you are not registered as a VAT/GST/Sales Tax Vendor.
   6. Amount - Enter the amount of the transaction (Inclusive or Exclusive of VAT/GST/Sales Tax, if applicable).
      After entering the transactions in the General Journal, the transactions will be displayed as follows:
      
      - You may enter transactions in a batch daily, and only post at the end of the month. Exiting or closing the batch, or even TurboCASH, will not cause these transactions to be lost. You may also choose to post after every entry.
      
      
5. Click on the F5: Balance icon, or press the F5 key on your keyboard, to create balancing transactions for the transactions entered in the batch.
6. TurboCASH will generate balancing entries to the bad debts (expense) account and the Output VAT (GST/Sales Tax) account.
   
   - If the Consolidate Balancing option is selected in the Setup Options for this batch, the description for the balancing entries or transactions, will be displayed as “BALANCING ENTRY General Jnl”.
   
   - It is a good idea to over type this description, as it is not very meaningful to an outside auditor or accountant. If you over type these, it will definitely make it easier to trace and reconcile transactions.
   
   
   
   • Over type the description with “Bad Debts Written-off” in the description column.
   • Over type the description with “Output VAT on Bad Debts Written-off” in the description column.
   • Do not over type the eight asterisks in the reference column, as this indicates that these are contra transactions.
7. Click on the F9: Process icon, or press the F9 key on your keyboard, to change the alias (batch name).
   - This will help you if you wish to identify a specific batch to generate a batch type report, or if you wish to export posted batches to a file.
   
   
8. Click on the F8: List icon, or press the F8 key on your keyboard, to list the batch.
   - It is a good idea to list the batch, and check the entries on the batch thoroughly. If there are any errors, you may edit the batch, before posting the batch.
   
   
9. Click on the F6: Post icon, or press the F6 key on your keyboard, to post (update) the batch to the ledger.

After posting the transactions, the T-Account View of the transactions should reflect as follows:

1. Debtor’s Ledger:
   
   The total amount including Output VAT (GST/Sales Tax) is credited to the Debtor’s Account.
2. General Ledger:
   
   
   

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