Overview
You might have a tenant move out without paying the rent they owe. There are several ways to record this in DoorLoop, but it's always best to speak with your accountant about how to handle this for your situation.
Here we'll walk through writing off the unpaid rent as a bad debt expense. The first time only, you'll need to create two new accounts in your Chart of Accounts. After that, you use a journal entry to write off the unpaid rent.
This method applies only if you follow accrual-based accounting. See Introduction to Cash vs. Accrual Accounting to learn the difference.
Create the Accounts
The first time you write off unpaid rent as a bad debt expense, you'll need to create two new accounts in your Chart of Accounts:
An expense account called Bad Debt Expense
A sub-account of Accounts Receivable called Allowance for Doubtful Accounts
Step 1 - Creating the Bad Debt Expense Account
To create the Bad Debt expense account, click Accounting > Chart of Accounts on the main menu.
On the Chart of Accounts page, click New Account button at the top corner.
On the New Account window, enter the following information:
Type - Expense
Account Name - Bad Debt Expense
Active Account - Turn On
Click the Lease Options tab and turn on the toggle for Use this account for Lease Charges.
Click Save to finish creating the account.
Step 2 - Creating the Allowance for Doubtful Accounts Sub Account
To create the Allowance for Doubtful Accounts sub-account, click Accounting > Chart of Accounts on the main menu.
On the Chart of Accounts page, click New Account button at the top corner.
On the New Account window, enter the following information:
Type - Asset -> Accounts Receivable
Account Name - Allowance for Doubtful Accounts
Active Account - Turn On
Toggle on "This is a sub-account" and select Accounts Receivable as the Parent Account.
Click Save to finish creating the account.
Issue a Credit on the Lease
The next step is to issue the credit for the amount of unpaid charges on the Lease.
To issue a credit on a lease, click Leasing > Active Leases on the main menu.
Find and click on the Lease that requires the credit.
On the lease's page, click on the Transaction tab. Then click Issue Credit.
On the Issue Credit window, enter the following: For the Account dropdown, select Bad Debt Expense.
Category - Bad Debt Expense
Amount - Enter the total amount of unpaid charges
Click Save to finish.
Create the Journal Entry
Next, you'll create a journal entry for the amount of unpaid rent. After creating the new accounts above, creating the journal entry is the only thing you'll need to do to record unpaid rent as a bad debt expense.
Click on Create New at the top of the main menu. Then under the Transactions section, select Journal Entry.
Select the Property, choose One Time Journal Entry, and set the Entry Date.
On the first line, from the Category drop-down, select Accounts Receivable and add an optional Description. (Such as unpaid rent or something to remind you why you are creating this journal entry.) Enter the amount of unpaid charges in the Credit column.
On the second line, select the Allowance for Doubtful Accounts category in the Account drop-down. Enter the amount of unpaid charges in the Debit column.
When you're done, click Save.
Disclaimer
The information provided is not offered by a licensed accountant, should not be considered accounting, financial, or legal advice, and is provided (and intended) for general informational purposes only. Do not rely on the information provided; rather, please verify applicable accounting laws and regulations independently. This information should not be considered a substitute for professional advice and does not offer Generally Accepted Accounting Principles (GAAP). The author and publisher are not liable for any damages or losses resulting from reliance on this information.