Write-Off

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Definition of 'Write-Off'

A write-off is an accounting entry that removes an asset or liability from the books. This can be done for a variety of reasons, such as when an asset is no longer useful or when a liability is no longer owed.

There are two main types of write-offs:

* **Permanent write-offs** are those that are made when an asset is no longer expected to generate any future economic benefits. This can happen when an asset is damaged beyond repair, when it becomes obsolete, or when it is sold for less than its book value.
* **Temporary write-offs** are those that are made when a liability is expected to be paid in the future, but is not yet due. This can happen when a company has a lawsuit pending against it, or when it has a warranty obligation to its customers.

When a write-off is made, it reduces the company's assets or liabilities and increases its net income. This can have a number of implications for the company, such as reducing its tax liability or making it more attractive to potential investors.

Write-offs are an important part of accounting, and they can be used to manage a company's financial performance. However, it is important to use write-offs only when they are appropriate, and to make sure that they are properly documented.

Here are some additional details about write-offs:

* **Write-offs are not the same as depreciation**. Depreciation is an accounting method that allocates the cost of an asset over its useful life. Write-offs are made when an asset is no longer useful, regardless of its age.
* **Write-offs can be taken for both tangible and intangible assets**. Tangible assets are physical objects, such as land, buildings, and equipment. Intangible assets are non-physical assets, such as patents, trademarks, and goodwill.
* **Write-offs can also be taken for liabilities**. Liabilities are debts that a company owes. When a liability is no longer owed, it can be written off.
* **Write-offs can have a number of implications for a company**. They can reduce the company's assets or liabilities, increase its net income, and affect its tax liability.

It is important to understand the different types of write-offs and how they can affect a company's financial performance. If you are unsure whether a write-off is appropriate, you should consult with an accountant.

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