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Proper way to handle bad debts


For quite some time I've been handling bad debts by receiving cash into 
a Bad Debts expense account. This works fine for accrual based 
reporting, but we still use cash reporting for the IRS, and doing cash 
flow projections.

And now I'm finding that when I write off bad debt using this approach, 
I have bad debt showing up as an expense on a cash-based PNL report 
(using 1.4).

My CPA is not happy with this!

So, couple questions.

1. Is there a different technique I should use to write off bad debt?
2. If not, is there a way to classify the bad debt account so that it is 
not listed on a cash-based PNL?

John Locke

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