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What is a Write-Off?

A write-off is an accounting action that removes the value of an asset from the books because it is no longer recoverable. The asset's value is transferred to an expense account, reducing profit. Common write-offs include bad debt, obsolete inventory, and equipment that is broken or obsolete.

A write-off is an admission: this asset is not worth what we said it was. When inventory rots, when a customer disappears without paying, when a laptop is stolen — the value on the books no longer matches reality. Writing it off corrects the books and recognises the loss.

A write-off is different from depreciation. Depreciation spreads an asset's cost over its useful life gradually. A write-off removes the remaining value all at once because the asset is gone, broken, or worthless. Tax authorities usually require evidence (police report for theft, destruction certificate for equipment) before allowing a write-off as a deductible expense.

Example

A restaurant discovers €1,500 of spoiled food in the freezer after a power cut. The inventory is written off: debits Cost of Goods Sold €1,500, credits Inventory €1,500. The loss appears on the income statement for that period.

Questions

What is the difference between a write-off and a write-down?

A write-off removes the entire remaining value of an asset (it is worth zero). A write-down reduces the value partially — the asset is still worth something, just less than before. A laptop worth €1,000 that is damaged might be written down to €400; the same laptop stolen is written off entirely.

Can I deduct a write-off from my taxes?

Generally yes — a legitimate write-off (bad debt, obsolete inventory, stolen equipment) is a deductible business expense. The rules and required evidence vary by jurisdiction. Keep documentation: invoices, police reports, depreciation schedules.

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