It is regarded as a business loss, where potential income is now recognized as an expense and transferred to a write-off account within the Expense category.

Consider an example where Frank has an outstanding invoice of $200, he has gone out of business and won’t be able to clear it.

To write-off, follow the steps below:

1. Create Journal Entry of type Write-Off Entry.
2. Select Write Off account to debit and Debtors to credit.
3. Select Party Type as Customer with Frank as Party.
4. Choose Reference Type & Reference Invoice you want to write off (expand the Debtor’s row and scroll down to Reference section).

Once the balance is written off, the amount will be booked as an expense and outstanding against Frank will start reflecting 0.