This issue is driving me bonkers! You're correct- bad debt should never be on a cash basis payers income statement. Cash basis books should never show sales on the PL until the customer pays. If you put it to bad debt, youre taking an expense against income that never happened. It doesnt offset either like they say it does in cash books. Those instructions are literally for accrual only. I have a few clients who have cash basis books and I figured the same thing- just zero it out. But doesn't that have implications for sales tax?