If a customer with an unpaid balance is made inactive, what happens to the open balance?

The choice regarding the creation of a journal entry to write off the balance is not accurate in this context. When a customer with an unpaid balance is made inactive, the open balance does actually remain unchanged; it is not deleted, nor is a journal entry created to write off the balance. Making a customer inactive simply means that they will no longer appear in active customer lists or reports, but all prior transactions, including any outstanding balances, are preserved within the system for historical accuracy and reporting purposes.

In QuickBooks, when a customer is set to inactive, it serves to clean up the customer list without impacting the financial records associated with that customer. This allows businesses to maintain accurate records of past transactions while keeping the customer list neat and manageable. Therefore, the correct understanding of the situation is that while the customer is inactive, their outstanding balance is still intact and can be referenced if needed in the future.