Write-off

A write-off refers to an accounting action that reduces the value of an asset or eliminates an uncollectible debt from a company's balance sheet. It represents a decision to acknowledge that certain assets are no longer recoverable, thereby recognizing a loss in financial statements. This is common in businesses and tax situations when evaluating bad debts or depreciation.

Write-off meaning with examples

• After reviewing the company's accounts, the auditors recommended a write-off of the old inventory that had become obsolete. By doing so, they aimed to provide a clearer financial picture for the stakeholders to better understand the company’s true assets and liabilities as well as its profit margins.
• During tax season, business owners often assess their accounts to identify potential write-offs that can reduce taxable income. For instance, donations made to charity can be considered a write-off, which allows the taxpayer to lower their taxable amount while supporting a good cause at the same time.
• The finance department announced a significant write-off for the accounts receivable due to numerous clients defaulting on payments. This decision, although difficult, was necessary to reflect the financial reality of the company and prepare for future budgeting adjustments.
• After extensive efforts to collect overdue payments from clients, the company decided to proceed with a write-off for the uncollectible accounts. This action was taken to prevent further financial strain and focus resources on more promising revenue-generating activities.