A write-off is a reduction of the recognized value of something. In accounting, this is a recognition of the reduced or zero value of an asset. In income tax statements, this is a reduction of taxable income, as a recognition of certain expenses required to produce the income.
In income tax calculation, a write-off is the itemized deduction of an item's value from a person's taxable income. Thus, if a person in the United States has a taxable income of $50,000 per year, a $100 telephone for business use would lower the taxable income to $49,900. If that person is in a 25% tax bracket, the tax due would be lowered by $25. Thus the net cost of the telephone is $75 instead of $100.
In order for American business owners to write off business expenses, the Internal Revenue Service states that purchases must be both ordinary and necessary.[1] This means that deductible items must be usual and required for the business owner's field of work. For example, a telemarketer may deduct the purchase of a telephone, since telephones are crucial for that line of work, whereas a professional musician may not.
Accountingedit
In business accounting, the term 'write-off' is used to refer to an investment (such as a purchase of sellable goods) for which a return on the investment is now impossible or unlikely. The item's potential return is thus canceled and removed from ('written off') the business's balance sheet. Common write-offs in retail include spoiled and damaged goods. In commercial or industrial settings, a productive asset may be subject to write-off if it suffers failure or accident damage that is infeasible to repair, leaving the asset unusable for its intended purpose.
Bankingedit
Similarly, banks write off bad debt that is declared non collectable (such as a loan on a defunct business, or a credit card due that is in default), removing it from their balance sheets. A reduction in the value of an asset or earnings by the amount of an expense or loss. Companies are able to write off certain expenses that are required to run the business, or have been incurred in the operation of the business and detract from retained revenues.
Negative write-offsedit
A negative write-off refers to the decision not to pay back an individual or organization that has overpaid on an account. Negative write-offs can sometimes be seen as fraudulent activity if those who overpay a claim or bill are not informed that they have overpaid and are not given any chance to reconcile their overpayment or be refunded.
Some institutions such as banks, hospitals, universities, and other large organizations regularly perform negative write-offs, especially when the amount is considered low (e.g., $5 at some institutions or up to $15 or more at others).[citation needed]
Write-downedit
A write-down is an accounting treatment that recognizes the reduced value of an impaired asset. The value of an asset may change due to fundamental changes in technology or markets. One example is when one company purchases another and pays more than the net fair value of its assets and liabilities. The excess purchase price is recorded on the buying company's accounts as goodwill. If it becomes apparent that the purchased asset no longer has the value recorded in the goodwill account (i.e., if the asset cannot be resold at the same price), the value in the goodwill asset account is "written down". One example is when Rupert Murdoch's News Corp bought Wall Street Journal publisher Dow Jones at a 60% premium in 2007, which News Corp. later had to write down by $2.8 billion because of declining advertising revenues.[2]
A write-down is sometimes considered synonymous with a write-off.[3] The distinction is that while a write-off is generally completely removed from the balance sheet, a write-down leaves the asset with a lower value.[4] As an example, one of the consequences of the 2007 subprime crisis for financial institutions was a revaluation under mark-to-market rules: "Washington Mutual will write down by $150 million the value of $17 billion in loans".[5]
^"Washington Mutual 3Q Earnings to Tumble". Washington Post. 2007-10-06. Retrieved 2008-09-08.
External linksedit
Look up write-off in Wiktionary, the free dictionary.
Small Dollar Balance Policy at Purdue University
Alachua County Policy on Removal of Uncollectible Accounts from the Financial Statements (Amended)
696200 Miscellaneous Transaction Code is used for small dollar balances at Duke University
January 01, 1970
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For insurance write offs see Total loss A write off is a reduction of the recognized value of something In accounting this is a recognition of the reduced or zero value of an asset In income tax statements this is a reduction of taxable income as a recognition of certain expenses required to produce the income Contents 1 Income tax 2 Accounting 3 Banking 4 Negative write offs 5 Write down 6 See also 7 References 8 External linksIncome tax editIn income tax calculation a write off is the itemized deduction of an item s value from a person s taxable income Thus if a person in the United States has a taxable income of 50 000 per year a 100 telephone for business use would lower the taxable income to 49 900 If that person is in a 25 tax bracket the tax due would be lowered by 25 Thus the net cost of the telephone is 75 instead of 100 In order for American business owners to write off business expenses the Internal Revenue Service states that purchases must be both ordinary and necessary 1 This means that deductible items must be usual and required for the business owner s field of work For example a telemarketer may deduct the purchase of a telephone since telephones are crucial for that line of work whereas a professional musician may not Accounting editIn business accounting the term write off is used to refer to an investment such as a purchase of sellable goods for which a return on the investment is now impossible or unlikely The item s potential return is thus canceled and removed from written off the business s balance sheet Common write offs in retail include spoiled and damaged goods In commercial or industrial settings a productive asset may be subject to write off if it suffers failure or accident damage that is infeasible to repair leaving the asset unusable for its intended purpose Banking editSimilarly banks write off bad debt that is declared non collectable such as a loan on a defunct business or a credit card due that is in default removing it from their balance sheets A reduction in the value of an asset or earnings by the amount of an expense or loss Companies are able to write off certain expenses that are required to run the business or have been incurred in the operation of the business and detract from retained revenues Negative write offs editA negative write off refers to the decision not to pay back an individual or organization that has overpaid on an account Negative write offs can sometimes be seen as fraudulent activity if those who overpay a claim or bill are not informed that they have overpaid and are not given any chance to reconcile their overpayment or be refunded Some institutions such as banks hospitals universities and other large organizations regularly perform negative write offs especially when the amount is considered low e g 5 at some institutions or up to 15 or more at others citation needed Write down editA write down is an accounting treatment that recognizes the reduced value of an impaired asset The value of an asset may change due to fundamental changes in technology or markets One example is when one company purchases another and pays more than the net fair value of its assets and liabilities The excess purchase price is recorded on the buying company s accounts as goodwill If it becomes apparent that the purchased asset no longer has the value recorded in the goodwill account i e if the asset cannot be resold at the same price the value in the goodwill asset account is written down One example is when Rupert Murdoch s News Corp bought Wall Street Journal publisher Dow Jones at a 60 premium in 2007 which News Corp later had to write down by 2 8 billion because of declining advertising revenues 2 A write down is sometimes considered synonymous with a write off 3 The distinction is that while a write off is generally completely removed from the balance sheet a write down leaves the asset with a lower value 4 As an example one of the consequences of the 2007 subprime crisis for financial institutions was a revaluation under mark to market rules Washington Mutual will write down by 150 million the value of 17 billion in loans 5 See also editAmortization Charge off Depletion Depreciation Hull loss Revaluation of fixed assetsReferences edit Deducting Business Expenses Internal Revenue Service Retrieved 2020 12 06 Marketplace Write downs Marketplace 10 February 2009 Retrieved 2009 03 19 podcast Write down Definition of Write down by Merriam Webster Merriam Webster Retrieved 2021 11 05 Writedown Investopedia Retrieved 2008 09 08 Washington Mutual 3Q Earnings to Tumble Washington Post 2007 10 06 Retrieved 2008 09 08 External links edit nbsp Look up write off in Wiktionary the free dictionary Small Dollar Balance Policy at Purdue University Alachua County Policy on Removal of Uncollectible Accounts from the Financial Statements Amended 696200 Miscellaneous Transaction Code is used for small dollar balances at Duke University Retrieved from https en wikipedia org w index php title Write off amp oldid 1197080288 Write down, wikipedia, wiki, book, books, library,
