- A write-off is an accounting action that reduces the value of an asset while simultaneously debiting a liabilities account.
- Three common scenarios requiring a business write-off include unpaid bank loans, unpaid receivables, and losses on stored inventory.
- write-off is a business expense that reduces taxable income on the income statement.
- write-off is different from a write-down, which partially reduces (but doesn't totally eliminate) an asset's book value.
- Businesses regularly use accounting write-offs to account for losses on assets
- on the balance sheet, write-offs usually involve a debit to an expense account and a credit to the associated asset account
- The two most common business accounting methods for write-offs include the direct write-off method and the allowance method.
- business may need to take a write-off after determining a customer is not going to pay their bill
- Inventory can be lost, stolen, spoiled, or obsolete
- writing off inventory generally involves an expense debit for the value of unusable inventory and a credit to inventory.
- Tax credits may also be referred to as a type of write-off. Tax credits are applied to taxes owed, lowering the overall tax bill directly.
- Corporations and small businesses have a broad range of expenses that comprehensively reduce the profits required to be taxed. An expense write-off will usually increase expenses on an income statement which leads to a lower profit and lower taxable income.
