What does “write-off” mean?

Question

I've heard this term throughout my life but I've never been entirely sure exactly what it means or why you would want to write something off.

Answer 1

Wikipedia also gives it a decent treatment.

The term write-off describes a reduction in recognized value. In accounting terminology, it refers to recognition of the reduced or zero value of an asset. In income tax statements, it refers to a reduction of taxable income as recognition of certain expenses required to produce the income. Write-off is also used in vehicle insurance to describe a vehicle which is cheaper to replace than to repair, sometimes colloquially referred to as being "totaled" (a total loss). Write-off is the act of creating Debit payment against the Credit and vice-versa, to nullify the transaction.

For income tax purposes it is synonymous with "deduction." The Wikipedia article provides some examples of a few types of write-offs.

Answer 2

The term "write-off" is usually applied in the annual accounting/audit process. It can act to reduce a tax liability.

It is applied to capital assets which have either become redundant (replaced by upgrades) or which no longer serve a purpose (even if they are still usable). This allows their value to be reduced to zero and "written" out of the company's asset register.

Answer 3

Wiktionary gives a pretty accurate and straight-forward definition:

1. (accounting) To reduce an asset's book value to zero
2. (accounting) To record an expenditure as an expense.
3. (accounting) To record a notional expense such as amortization or depreciation.

4. Figuratively, to assign a low value to something.

   When Katya was injured, he wrote off the team's chances in the finals.