I have a customer [Family Dollar USA] that refuses to pay an invoice. I still have the AR invoice sitting out there, but I'm not sure what to do.

Xero "help" says to create a credit note against the AR invoice - but I don't see how that ends up in my 'expense' column. I assume that when I create the credit note, it will go against my AR account.

So - do I need another expense transaction to record this into an expense category (like BAD DEBT EXP) or similar? If so, won't I need to pull the money / transaction from somewhere?

Any help would be appreciated from the accounting / book-keeping wizards on the board. :)



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  • Hi Brad,

    Xero are telling you right - you should create a credit note to match against the invoice. I think the bit that is confusing you is how to code the cost to an expense account for bad debts, rather than as a negative sale?

    If so, that's easy, just select your bad debts account in the Account dropdown when you create the credit note. see below:

    Hope this is the answer you were looking for.


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