The Procurement Glossary » Write-Off

Write-Off

Finance & Payments

Definition

The accounting removal of an asset's value when it can no longer be recovered, such as obsolete or damaged stock.

Explanation

Writing off inventory recognises a loss and cleans the balance sheet of value that no longer exists. High write-offs signal over-ordering, poor forecasting or obsolescence, pointing back to inventory and demand management.

Example

RM80,000 of obsolete components are written off after a product redesign.

Related terms

• Obsolescence — The loss of value when inventory becomes outdated, unusable or unsellable.
• Inventory Carrying Cost — The total cost of holding inventory — capital tied up, storage, insurance, obsolescence and shrinkage.
• Inventory — The goods and materials a business holds for use, sale or production.
• Accrual — An accounting entry recognising a cost that has been incurred but not yet invoiced or paid.

Frequently Asked Questions

What is Write-Off?

The accounting removal of an asset's value when it can no longer be recovered, such as obsolete or damaged stock. Writing off inventory recognises a loss and cleans the balance sheet of value that no longer exists. High write-offs signal over-ordering, poor forecasting or obsolescence, pointing back to inventory and demand management.

Can you give an example of Write-Off?

RM80,000 of obsolete components are written off after a product redesign.

Back to the procurement glossary | Procurement concepts | Contact us