Definition of write off

The phrase "write off" originated in accounting and bookkeeping, which is a system used to keep track of financial transactions. In this context, "writing off" an asset or expense refers to the decision made by a business to remove it from its accounting records, as it becomes clear that the asset has little or no value and will never generate a return on investment. This can happen due to factors such as damage, obsolescence, or theft. When an asset is written off, it is removed from the company's balance sheet and moves to another financial statement called the income statement, where it is recorded as a loss against earnings. This loss is then carried forward as a tax deduction, which provides some financial benefit to the business in subsequent periods. In essence, "writing off" an asset or expense is a way for a company to acknowledge the reality that it will not recover its investment in that item and fully deduct the cost for tax purposes.