What is Write-off?
Nexa Consultancy | Startup & Finance Glossary
A write-off is an accounting action that reduces the value of an asset to zero. It is essentially a declaration that the asset has no remaining value. This is most commonly done for accounts receivable that have been deemed uncollectible (bad debt) or for inventory that is completely unsellable.
For Startups: Writing off a bad debt is a common occurrence. It's an admission that the startup will not be able to collect the money owed by a customer. The write-off is recorded as an expense on the income statement, which reduces the company's profit for the period.
Example: A startup has a receivable of ₹2 Lakhs from a customer who has gone bankrupt. The startup "writes off" this amount, removing it from its accounts receivable and recording a ₹2 Lakh bad debt expense.