Write-Off
Removing an uncollectible receivable or worthless asset from the books as an expense.
A write-off reduces an asset's value to zero and records the loss as an expense. Common write-offs include uncollectible receivables, obsolete inventory, and damaged goods. Write-offs differ from write-downs (partial reduction) and should not be confused with the colloquial use meaning any tax deduction.
Example
After repeated collection attempts, a freelance developer writes off a client's $4,500 unpaid invoice, debiting bad debt expense and crediting accounts receivable.
Why It Matters for Your Business
Timely write-offs keep your financial statements accurate by removing fictitious asset values that overstate your financial health.
Practical Tips
- •Establish a clear write-off policy (e.g., write off after 120 days with no response).
- •Document all collection attempts before writing off a debt for audit protection.
Related Terms
More Accounting Terms
Accounts Payable
Money owed by a business to its suppliers or creditors for goods or services received but not yet paid for.
Accounts Receivable
Money owed to a business by its customers for goods or services delivered but not yet paid for.
Accrual Accounting
An accounting method that records revenues and expenses when they are incurred, regardless of when cash is exchanged.
Asset
Any resource owned by a business that has economic value and can provide future benefits.
Balance Sheet
A financial statement showing assets, liabilities, and equity at a specific point in time.
Related Financial Guides & Resources
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