Negative accounts receivable on a cash basis balance sheet

Hello TXbizlady,

Thank you for reaching out to the QuickBooks Community! I will be more than happy to shed some light here. In QuickBooks Desktop, a write-off typically uses a Credit Memo applied to an invoice. Under the cash basis method, applying a Credit Memo to an invoice before the invoice is actually paid creates a negative Accounts Receivable (A/R) balance.

The reason this happen is that on an accrual basis, income is recorded when the invoice is created. On a cash basis, income is only recorded when you receive cash for that invoice. In addition, when you write off an uncollectible invoice with a Credit Memo, cash basis QuickBooks tries to match that credit's effect. If no actual cash payment was ever received, the credit memo acts as a "cash refund" to your books. This wipes out past cash-basis income and artificially pushes your A/R deeper into the negative. 

I hope that helps! Let me know if you have any additional questions or concerns! See you around.