It may happen that a customer is unable to pay an invoice, for example because the company has gone bankrupt. In this situation you will ultimately be left with an uncollectible invoice. On the one hand, this provides a clear picture of the turnover and ultimate result of your company, but certainly also with regard to the VAT to be paid.
This article describes how you can mark an invoice as 'uncollectible'.
Preparation
Ensure that there is a general ledger account into which the uncollectible invoice can be posted. In the following example we assume a Dutch chart of accounts and we have created account 4875 - Uncollectible accounts receivable as a Loss & Profit account.
We now need to ensure that the package knows to use this account when dealing with uncollectible invoices. To do this, we navigate to the Miscellaneous menu - Company Preferences and select account 4875 - Uncollectible accounts receivable as the Default Uncollectible Invoices account.
Process uncollectible invoice
The Tax Authorities require that you must be able to demonstrate that you have done everything possible to collect the amount (if you ultimately want to be able to reclaim the VAT on the uncollectible invoice). You will therefore have to ensure that you have sent a reminder for the relevant invoice.
We now select the invoice in question:
Then from the More menu we select the Uncollectible invoice option
You will now be asked for confirmation
Click OK
As you can see, the invoice has now been given the Uncollectible status
Now if we want to see which entries have been made, we select View journal entries from the More menu
As you can see, account 1300 - Debtors is credited with the invoice amount and account 4875 - Uncollectible accounts receivable is debited with the invoice amount.
Ultimately, you want to write off the uncollectible invoice over time, so that you can also reclaim the VAT. See: Writing off uncollectible invoices