How to write off a an uncollectable loan (2024)

‎December 30, 202208:20 PM

I originated a loan to a client and it will never be paid back. How do I remove it from my balance sheet? There are lots of articles on how to write off bad debt when it comes to invoices but I can't find anything on loans.

• QuickBooks Desktop

Rainflurry

@VernMitchell

A bad debt expense applies to any business bad debt that has become totally worthless, whether it is a note receivable from a loan or accounts receivable from a sale. You account for it the same way. To remove the loan from your balance sheet, create a journal entry: debit bad debt expense and credit the note receivable for the uncollectible amount. You should now show the expense on your P&L and the note receivable removed from your balance sheet.

Hello, VernMitchell.

I agree with Rainflurry. You'll have to create a Journal entry to remove the loan from your balance sheet. I'll show you how to create a J.E. in QuickBooks.

Here's how:

1. Click theCompanymenu and chooseMake General Journal Entries.
2. Fill out the fields to create your journal entry. Make sure your debits equal your credits when you’re done.
3. TapSave & Close.

However, I still recommend reaching out to your accountant to guide you in creating JE. To make sure your books are still intact and accurate.

For more information, on how to record journal entries click this article:Create a journal entry in QuickBooks Desktop.

Let me know if you need further assistance with QuickBooks. We're always right here ready to help you anytime you need us. Have a great day!

@AileneA RE: I'll show you how to create a J.E. in QuickBooks.

Piling on after @Rainflurry isn't helpful and doesn't add any value. Also, the OP didn't ask how to enter a Journal Entry.

@VernMitchell

Thanks for the inquiry. I recently made an exit from business ownership/accounting and do this forum on the side just for fun and to help out.

Hello Rainflurry,

We've reviewed the solution you’ve shared and it's correct and accurate. Thank you for sharing your inputs to help address the issue.

We love to see members supporting one another! Have a great day.