Write-Off
Definition
A write-off is removing an amount from the books because it will not be collected or is no longer valid. In A/R, a write-off removes a customer balance that will not be paid.
Example
A customer owes $500 and has been unresponsive for over a year. The bookkeeper writes off the $500, removing it from Accounts Receivable and recording it as bad debt.
Why It Matters
Keeping uncollectible amounts on the books overstates assets. A write-off makes the books reflect reality.