To complete this exercise, you must be in the Sample company. From your QBOA account, click on the Gear icon on the top right corner of the screen, then select Sample company.

Note that you will be logged out of your current account. If you are sure, click "Continue" to confirm. 

If you haven't done so already, make sure you review [how to create and apply a credit memo](https://scribehow.com/shared/32_Create_and_Apply_a_Credit_Memo__89k4JzomTBG2JjAZA7b93Q), so you're familiar with the process in general.

You'll also want to familiarize yourself with [how to write off an invoice.](https://scribehow.com/shared/A49a_Writing_Off_Invoices__za_QXiLXTO-QQ_2VE158Lg)

Now let's get started with the exercise.

First, we need to set up a Bad Debts expense account.

Click "Accountant Tools", then select "Chart of accounts".

In the Save account under field, select "Expenses".

In the Tax form section, select "Bad Debts".

In the Account name field, type "Bad Debts".

Next, you will need to create a Bad Debts service item.

From the left navigation bar, hover over Sales, then select "Products & services".

In the Name field, type "Bad Debts".

*Leave the box checked next to I sell this product/service to my customers.*

In the Income account field, select "Bad Debts" (even though you set it up as an expense account).

Before we create the Credit memo, let's take a look at Travis' outstanding invoice. We'll need to know the total.

Fastandeasyqbo

QuickBooks

QuickBooks is a widely-used accounting software developed by Intuit, designed to simplify financial management for businesses of all sizes. It provides a user-friendly platform for tasks like invoicing, expense tracking, payroll processing, and generating financial reports. QuickBooks automates many financial processes, making it easier for businesses to monitor their financial health, prepare taxes, and manage cash flow. With its various versions and integrations, QuickBooks caters to the needs of freelancers, small businesses, and larger enterprises, offering a flexible and comprehensive solution for efficient accounting and financial management.

app.qbo.intuit.com

fastandeasyqbo.com

Scenario: Craig's client, Travis Waldron, suffered a terrible office fire. Everyone is fine, but his entire business was decimated. And while insurance will cover the property, it won't cover Travis' outstanding bills, including the one from Craig.

Craig is going to have to write off Travis' outstanding invoice, but the products were taxable, and using the Write Off tool won't reduce his tax liability.  You'll have to use a Credit memo instead.

Let's see how that would work.

A.4.9b Writing off with a Credit Memo