💬 Start a chat with us to unlock bad debt ledgers in the Chart of accounts!
A bad debt ledger is an optional expense account. When one is assigned to a revenue account, write-offs performed in the Action center for that revenue account post to the bad debt ledger instead of reducing revenue directly. In addition, Amilia SmartRec uses system-generated tax ledger accounts to track the tax portion of write-offs separately.
Setting one or more up gives you:
Clean revenue figures: write-offs post as bad debt expense instead of reducing revenue, so your gross revenue isn't distorted by uncollectible balances
Reliable reporting: every write-off is tagged, so you can report on total write-offs without depending on ledger-naming conventions
A path off manual workarounds: if you're currently using a "bad debt revenue ledger" workaround, you can migrate to a proper setup without losing historical data.
🎗️ This article covers bad debt ledger setup and behavior. To learn how to write off invoice items (including bulk write-offs) and finding aging balances in the Action center, see How to write off oustanding receivables in the Action center.
How it works, permissions & limitations
Before you start
Bad debt ledger accounts are available by request only. To request, start a chat with our support team.
Bad debt ledgers are optional. Without one assigned, write-offs still work — they debit the item's revenue account instead.
Permissions are needed to create bad debt ledger accounts and to write off invoice items.
Permission name 🔑 | What it does |
Finance and reporting | Required to view, create, and edit ledger accounts — including bad debt ledgers — in the Chart of accounts. |
Finance and reporting | Required to view outstanding receivables in the Action center. |
Finance and reporting | Required to write off invoice items and view Outstanding receivables in the Action center. |
What to expect
1. Create a bad debt ledger account in the Chart of accounts (Expense - Bad debt). More info here.
2.Assign it to one or more revenue accounts in the ledger assignments workbook. More info here.
3. Write off invoice items from the Action center. More info here.
Once assigned, write-offs on those revenue accounts debit the bad debt ledger instead of the revenue account, keeping your revenue figures clean. This only applies going forward (it doesn't affect past write-offs). After you write off an invoice item:
A credit memo is created in the client's account and automatically reconciled to the invoice item(s) written off.
In journal entries, the write-off debits the bad debt ledger (or the revenue account, if none is assigned) and credits Account deposit; a Reconciliation transaction then clears Accounts Receivable.
In reports, the item disappears from the AR by invoice item report, and the write-off can be filtered for by transaction type in journal entries.
Limitations ⚠️
Each revenue account can only be assigned to one bad debt ledger.
There's no system-generated default bad debt ledger account. Unassigned revenue accounts fall back to debiting the revenue ledger directly on write-off.
A system-generated bad debt tax adjustment ledger account tracks the tax portion of a write-off (but only when a bad debt ledger is assigned to the revenue account).
Past transactions can't be reclassified to an expense bad debt ledger.
Deferred revenue isn't affected by a write-off or by bad debt ledger setup.
Step 1 - Create a bad debt ledger account
Go to Accounting and finance > Chart of accounts > New ledger account.
Set the Type and sub-type to Expense - Bad debt. Save when finished.
Create as many bad debt ledgers as you need. You may want to create a bad debt ledger account for each type of your offerings, for example:
9001 - Bad Debt Expense - Programs
9002 - Bad Debt Expense - Childcare
9003 - Bad Debt Expense - Memberships
Step 2 - Assign bad debt ledgers to revenue accounts
1. Go to Accounting and finance > Chart of accounts > Assignments, and export the ledger assignments spreadsheet.
2. Click on the first sheet titled: Revenue to DR & AR & BD.
3. Refer to column D - Bad debt.
By default, this column will show as blank or show as Sales debit. This means a write-off debits the item's revenue account directly.
To have the write-off debit an expense account instead, select an existing Expense - Bad debt ledger account from the dropdown.
4. For each revenue account, assign one bad debt ledger you want its write-offs to post to.
5. Once your assignments are complete, save and re-import the spreadsheet.
For more on ledger assignments, check out this article.
Step 3 - Write off balances from the Action center
Admins with permission can write off balances from the Outstanding receivables section in the Action center. Click here to see the process.
With a bad debt ledger assigned, the write-off debits the bad debt ledger account. The loss shows up as a separate expense, and revenue stays untouched
Without one assigned, the write-off debits the revenue account directly instead. This reduces revenue, the same way a rebate would.
⚠️ This only applies going forward. A write-off performed before you assign a bad debt ledger still debits the revenue account (i.e., sales debit).
What to expect in journal entries
⚠️ This only applies going forward. A write-off performed before you assign a bad debt ledger still debits the revenue account. Assigning one later doesn't retroactively change past write-offs.
Every write-off posts as two linked transactions, regardless of whether a bad debt ledger is assigned: a Write-off transaction that credits Account deposit, followed by a Reconciliation transaction that clears Accounts Receivable against that credit.
What gets debited in the Write-off transaction depends on setup:
When a bad debt ledger assigned, it debits the bad debt ledger plus any system-generated Bad debt tax adjustment accounts for applicable taxes;
Without a bad debt ledger assigned, it debits the revenue account plus the standard tax liability accounts instead.
Example 1 - Partially unpaid invoice
Example 1 - Partially unpaid invoice
A member is invoiced $200 for a swim program. They pay $120. The remaining $80 is deemed uncollectible and written off.
At invoicing
Transaction | Ledger | Debit | Credit |
Invoice | 1200 – Accounts Receivable | $200.00 |
|
Invoice | 0110 – Program Revenue |
| $200.00 |
At payment
Transaction | Ledger | Debit | Credit |
Payment | 14000 – Cash / Bank | $120.00 |
|
Payment | 0001 – Account Deposit |
| $120.00 |
Reconciliation | 0001 – Account Deposit | $120.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $120.00 |
AR balance remaining: $80.00
At write-off, with a bad debt ledger assigned
Transaction | Ledger | Debit | Credit |
Write-off | 9000 – Bad Debt Expense | $80.00 |
|
Write-off | 0001 – Default - Account deposit |
| $80.00 |
Reconciliation | 0001 – Default - Account deposit | $80.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $80.00 |
Revenue stays at $200. The write-off is recognized as an operating expense, not a price reduction.
Without a bad debt ledger assigned: the write-off debits the original revenue ledger instead of Bad Debt Expense, then follows the same Account deposit/Reconciliation pattern to clear AR. Revenue drops to $120 recognized and the write-off becomes indistinguishable from a rebate.
Example 2 - Unpaid invoice with taxes and a discount
Example 2 - Unpaid invoice with taxes and a discount
A member registers for summer camp: list price $300, an early-bird discount of $30, taxable net of $270, tax (10%) of $27. Invoiced total: $297. The member never pays, and the full balance is written off.
At invoicing
Transaction | Ledger | Debit | Credit |
Invoice | 1200 – Accounts Receivable | $297.00 |
|
Invoice | 0006 – Deferred Discounts | $30.00 |
|
Invoice | 0110 – Camp Revenue |
| $300.00 |
Invoice | 0010 – Tax Payable |
| $27.00 |
AR = $297 | Net revenue recognized = $270 | Tax liability = $27
At write-off, with a bad debt ledger assigned
Transaction | Ledger | Debit | Credit |
Write-off | 9000 – Bad Debt Expense | $270.00 |
|
Write-off | 0014 – Bad Debt Tax 1 Adjustment (system-generated) | $27.00 |
|
Write-off | 0001 – Default - Account deposit |
| $297.00 |
Reconciliation | 0001 – Default - Account deposit | $297.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $297.00 |
With a bad debt ledger assigned, the original tax liability account isn't debited directly. Instead, the tax portion posts to a system-generated Bad debt tax adjustment liability account per tax type. This isolates it so you can review it separately for any tax relief claims, based on your jurisdiction's rules.
Without a bad debt ledger assigned
Transaction | Ledger | Debit | Credit |
Write-off | 0110 – Camp Revenue | $270.00 |
|
Write-off | 0010 – Tax Payable | $27.00 |
|
Write-off | 0001 – Default - Account deposit |
| $297.00 |
Reconciliation | 0001 – Default - Account deposit | $297.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $297.00 |
Without a bad debt ledger, tax is debited directly from the standard tax liability account — the same treatment as a rebate.
Example 3 - Invoice with deferred revenue
Example 3 - Invoice with deferred revenue
A member enrolls in a childcare program at $200/month, billed upfront and fully deferred. As service is delivered daily ($10/day), revenue is recognized. After 5 days ($50 recognized, $150 still deferred), the member stops attending and pays $50. The remaining $150 AR balance is written off.
At invoicing
Transaction | Ledger | Debit | Credit |
Invoice | 1200 – Accounts Receivable | $200.00 |
|
Invoice | 12995 – Deferred Revenue |
| $200.00 |
Daily service delivery (5 days × $10/day)
Transaction | Ledger | Debit | Credit |
Service rendered | 12995 – Deferred Revenue | $10.00 |
|
Service rendered | 0110141320 – Program Revenue |
| $10.00 |
After 5 days: $50 recognized as revenue, $150 still deferred.
At partial payment
Transaction | Ledger | Debit | Credit |
Payment | 14000 – Cash / Bank | $50.00 |
|
Payment | 0001 – Account Deposit |
| $50.00 |
Reconciliation | 0001 – Account Deposit | $50.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $50.00 |
AR balance remaining: $150.00
At write-off of the remaining AR, with a bad debt ledger assigned
Transaction | Ledger | Debit | Credit |
Write-off | 9000 – Bad Debt Expense | $150.00 |
|
Write-off | 0001 – Default - Account deposit |
| $150.00 |
Reconciliation | 0001 – Default - Account deposit | $150.00 |
|
Reconciliation | 1200 – Accounts Receivable |
| $150.00 |
Balance sheet snapshot after write-off:
Account | Balance |
AR | $0 (written off) |
Deferred revenue | $150 — still on the balance sheet |
Revenue (earned) | $50 recognized |
Bad Debt Expense | $150 recognized as loss |
Deferred revenue is untouched by the write-off. A write-off only clears the AR side. The deferred liability stays on the books until the service is delivered or manually adjusted.
Bad debt reporting
Once a bad debt ledger is assigned and in use:
Revenue reports stay accurate — write-offs no longer reduce revenue for the assigned account, since the loss posts to the bad debt ledger instead.
AR by invoice item report — the item and its balance disappear from the report once written off, the same as any other write-off.
Journal entries export — filter by the Write-off transaction type to isolate all write-off activity, regardless of whether a bad debt ledger was assigned.
FAQ
What if a revenue account doesn't have a bad debt ledger assigned?
Write-offs for that revenue account debit the revenue ledger directly instead of a bad debt expense ledger.
Can I use one bad debt ledger for all my revenue accounts?
Yes, if that fits how you want to track bad debt. You can also create separate bad debt ledgers per revenue category (e.g., memberships, programs) for more detailed reporting.
Will this change how past write-offs are recorded?
No. Bad debt ledger assignments only apply to write-offs made after the assignment is in place. Past transactions aren't reclassified.
Why do I see a "Bad debt tax adjustment" account I didn't create?
This is a system-generated account, created automatically to isolate the tax portion of a write-off when a bad debt ledger is assigned, so it doesn't debit your standard tax liability account directly.
I'm using a workaround bad debt revenue ledger. How do I switch?
Before the write-off feature existed, some organizations used Give a rebate or a custom item credit to zero out balances they knew they'd never collect, often against a revenue ledger renamed something like "Bad Debt" or "Write-offs."
Rebates and write-offs now serve distinct purposes, and it's important to use the right one:
Rebates | Write-offs |
Rebates correct a price that was wrong, or reduce a price for a valid reason (a missed session, financial assistance, a service issue). They're discounts, and they reduce revenue accordingly. | Write-offs are for balances that will never be collected, even though the price was correct. This is what bad debt ledgers are built for. |
💡 If you've been using rebates or custom item credits to record uncollectible balances, switch to the write-off feature going forward, so your reporting and accounting reflect the correct transaction type.
Steps to move to using proper bad debt ledger accounts
If you're using a revenue ledger named something like "Bad Debt," with rebates applied to zero out uncollectible balances, you can move to a proper bad debt ledger:
Create a new bad debt ledger (see Step 1 above), using the same GL code your external accounting system already uses for bad debt expense, if applicable.
Assign it to your revenue accounts in the ledger assignments workbook (see Step 2 above).
Rename your old workaround ledger (e.g., [LEGACY] Bad Debt Workaround) so it's clear it's no longer in use. Ledger accounts can't be deactivated or deleted once they have transaction history, so renaming is the only way to retire one.
To write off a balance on an invoice item, do it through the Action center (see Step 3 above)
⚠️ Historical write-offs processed through the old workaround can't be reclassified. This only affects new write-offs going forward.
* Last updated in August 2026
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