and now finally we will learn how to write off uncollectible rent
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sometimes tenants move out after becoming bankrupt or just in a condition where they simply can't pay
this means there's several months rent owed that will never be collected
if you recorded the uncollectible invoices then those invoices are adding to the balance of
the rent receivable account you could just delete them but you shouldn't
you should keep a record of the months they stayed and what they owed
sometimes the past invoices will have helpful information on them and you can just make the
tenant inactive so that you could reactivate the tenant if you ever need to see the details on
anything that was written on one of their invoices so what will happen when you write off an invoice
well rent receivable will go down because you're no longer owed that money because you wrote it off
and a normal accounting expense that accountants call bad debt expense will increase and this is
the expense that your company has when customers who owe you money don't pay
we will call this account uncollectible rent expense so just like we learned before
we click accounting chart of accounts then we go to the top right and click new now of course
the account type is expense and the detail type usually doesn't matter but they have one special
for us bad debts and instead of naming it bad debts we're going to name it uncollectible rent
expense
okay save and close
now we're able to do an example now let's imagine on august 15th you determine that dave deeney
will never pay well the bad news is that only the desktop accountants edition of quickbooks has the
write off invoices tool so unfortunately you will have to make a journal entry to account for this
and you may well ask how much money will the journal entry be well obviously it'll be the
amount of dave's balance because that's what we're writing off our books if we click reports and we
click tenant balance detail we can see that dave's balance the money amount that we will
never get is three thousand one hundred and fifty five dollars so that has to be brought down to
zero with the proper transaction we click the plus sign and then three choices below other we click
journal entry now we made this determination on august 15th of 2019 and click to bring the account
click the pull down arrow the first account we're going to put is the one we just put on the list
uncollectible rent expense and in accounting when we record an expense we always
debit the expense so dave's balance was three thousand one hundred and fifty five dollars
push the tab key keep pushing until it goes to the next row
now the account on the next row will also be 3155 but that will be removing his balance fund
from unearned rental income even though dave had a positive balance and owed us money
his balance in the individual customer records are reflected in the unearned rental income
account so we click here and then the computer knows to balance this out we need 3155 as a credit
but there's one very important last step on the same row as the unearned rental income account
where it says name you must choose the name dave deeney that's what tells quickbooks it's not just
any customer's balance it's specifically dave's deeney dave deeney going down by 3155 because his
rent is uncollectible when we click save and close we can see that dave's balance has been brought
well we didn't really refresh this report oh yeah we did okay dave deeney here it is dave deeney
this is his balance and here's the journal entry we just made bringing his balance down to zero
and if we click reports and then we click trial balance you can see that uncollectible rent
expense shows up for the first time in the trial balance as three thousand one hundred fifty five
dollars
you