How to Record a Payment for an Invoice that was Written Off in a Previous Year in QuickBooks

The way you record this payment will depend on your reporting method – Cash or Accrual. However, there is no Bad Debt in cash basis accounting and you therefore must be using an accrual basis system since there was a previous bad debt allocation.

The best way to record this payment is to enter a sales receipt. This will keep your books clean and will not affect historical data for periods already closed out. This payment will also be counted as this year’s income, as it should, when entered this way.

For Accrual Basis:

If you wrote off the original invoice as a bad debt in a prior year, you should enter a sales receipt – especially if sales tax is involved. The income should be recorded as “Other Income” instead of “Sales”, since the original “Sale” was recorded in a prior year and subsequently written off. The sales tax, if any, was also recorded in a prior period and was written off; however, it was never collected and possibly never paid to the state. The sales tax should be recorded as current, and paid with the next sales tax return and payment that is made. If the sales tax was paid to the state, it was probably adjusted or recovered in a later period when the original invoice was written off, which means the sales tax needs to be remitted to the state – again, since it has now been collected.