Manually write off a customer account

Summary

How to write off a customer account in Sage 50 Accounts.

Description

You can write off all the outstanding transactions on a customer's account. For example, if they cease trading. This transfers the total balance on their account to a Bad Debt Write Off nominal code. The transactions affect the Debtors amount on the Balance Sheet and the overheads on this year's profit and loss.

NOTE:

This article applies if you're using the Standard VAT scheme. Follow our alternative article is you use the VAT Cash Accounting scheme.

You can also use the automatic write off wizard in Sage 50 Accounts.

Resolution

Bad Debt Relief conditions

Check that you satisfy the HMRC bad debt relief requirements.

Bad Debt Write Off nominal code

Check if you have a Bad Debt Write Off nominal code.  By default, this is 8100, which is an overheads code.

  1. If you don't have a code, you can create a new one.
  2. Check your Chart of Accounts, to ensure that the nominal code you've created is within the correct section.

Check your customer account balance

  1. Go to Customers, select the relevant customer, then note the balance to write off.
  2. Check if this is a positive or negative balance.
▼ Balance is positive

In the example below, write off a customer account with a positive balance of 120.00.

Transactions to post:

  • A sales credit with the non-vatable tax code to decrease the customer's balance to zero
  • A journal to reclaim the VAT, when applicable
  1. Go to Customers then select Batch credit.
  2. Enter the relevant information on the Batch Customer Credit window. For example:
    A/C Date Credit No. N/C Details Net T/C VAT
    BROWN Write Off Date BadDbt 8100 Write Off 120.00 T9 0.00
  3. Press Save then Close.

If you later need to reclaim any VAT, refer to the reclaim VAT after writing off a positive balance section.

  1. Allocate all the outstanding transactions on the customer's account.  
▼ Balance is negative
In the example below, write off a customer account with a negative balance of 120.00.

Transactions to post:

  • A sales invoice to increase the customer's balance to zero
  • A journal to repay the VAT

When you write off a negative balance, you can ignore the six-month Bad Debt Relief conditions.

  1. Go to Customers then select Batch invoice.
  2. Enter the relevant information on the Batch Customer Invoices window. For example:
    A/C Date Ref N/C Details Net T/C VAT
    BROWN Write Off Date BadDbt 8100 Write Off 120.00 T9 0.00
  3. Press Save then Close.
  4. Allocate all the outstanding transactions on the customer's account.  
  5. Follow the post the journal to repay the VAT section below.

Post the journal to repay the VAT after a negative balance write-off

NOTE:

If the negative balance comes from an SA transaction, post the journal only when using the VAT cash accounting scheme. If you're on standard VAT, you don't reclaim VAT on an SA transaction, so don't post a journal to repay the VAT.

  1. Go to Nominal codes then select Journal entry.
  2. Enter a date and reference for the journal, then enter the relevant details to repay the VAT. 
  3. If the customer's transactions have different tax codes, calculate the relevant VAT amount that you need to repay.

NOTE:

Use the date that you're writing the account off.

For example:

N/C Name Details T/C Debit Credit
8100 Bad Debt Write Off Bad Debt T9 20.00 0.00
2200 Sales Tax Control Account Bad Debt T1 0.00 20.00
  1. Press Save then Close.

You've now posted the journal to repay the VAT.

To reclaim VAT after a positive balance write-off

If you write off an account that doesn't yet qualify for Bad Debt Relief, post the transactions to reclaim the VAT later.

NOTE:

Post the journal after following posting the sales credit in the balance is positive section above.

The journal moves the VAT amount from the Bad Debt Write Off nominal code to the Purchase Tax Control Account.

In the following example, you wrote off an account balance of 120.00, inc VAT at 20%. If you post this on 30 June, the write-off qualifies for Bad Debt Relief on 31 December.

  1. Go to Nominal codes then select Journal entry.
  2. Enter a date and reference then enter the relevant details to reclaim the VAT.
  3.  If the customer's transactions have different tax codes, calculate the relevant VAT amount that you need to repay.
    N/C Name Details T/C Debit Credit
    2201 Purchase Tax Control Account Bad Debt Relief T1 20.00 0.00
    8100 Bad Debt Write Off Bad Debt Relief T9 0.00 20.00
  4. Press Save then Close.

The journal appears in Box 4 on your next VAT Return, as required by HMRC. The net amount of the credit still appears in the Bad Debt nominal code, 8100 by default.

  1. Allocate all the outstanding transactions on the customer's account.   

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Solution Properties

Solution ID
200427112200771
Last Modified Date
Mon Aug 17 08:40:06 UTC 2026
Attributes
Product Details
Modules: Customers
Modules: Suppliers
Modules: Contact Management
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