Confused about Write Offs Bookkeeping Question

by Sheena
(Drayton Valley)

Write Offs

Write Offs

We are a LDT company that is run out of our home and I'm not sure what we can write off on the business books. How do you know what kind of expenses can be run through the business books?

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Jun 11, 2018
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starstarstarstarstar 		Write Offs Confusion
by: Stephanie

All expenses pertaining directly to your business can be deducted on the business books.

Typical expenses include Advertising, Automobile, Bank Charges, Finance Charges, Insurance, Inventory Purchases, Office Supplies, Salaries & Wages, Taxes & Licenses, Business Telephone, etc.

For a more detailed list of the different kinds of deductible expenses, check out this page on income tax deductions.

Otherwise, the rest of your office in home expenses (such as business portion of rent or mortgage payments, insurance, repairs and utilities) are deducted on your income tax return and so are not typically run through the business books.

If you are a sole proprietor and pay for any of these expenses from your business account, they should be coded through equity as an Owners Draw and so would show up on your Balance Sheet.

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Excess Inventory Write Off

Excess Inventory Write Off

Excess Inventory Write Off

Our school's annual fundraiser involves the purchase of glowlights for sale at the event.

Usually there is a small quantity of glowlights left over. Can these be written off as a loss and then subsequently sold off at reduced prices at school discos?

Funds are processed through the school's PTA.

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Jul 06, 2018
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starstarstarstarstar 		Writing Off Excess Inventory
by: Stephanie

Thank you for your question regarding if you can write off excess inventory as a loss.

When you purchase the inventory, the entire cost gets to be deducted as an expense. Because of this, you can not "write-off" the unsold inventory as a bad debt as this would be a double benefit.

You can sell the excess inventory at reduced prices to help make more money on the excess inventory.

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Write Off Client Job Expense

Write Off Client Job Expense

Write Off Client Job Expense

If a job was done for a client, but the client is not billed because the job was bad due to our fault, it would not be considered a Bad Debt because client does not owe anything, correct?

So, for tax purposes is it just an general expense? Is there a special way it should be written off?

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Jul 06, 2018
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starstarstarstarstar 		Writing Off Job Expenses
by: Stephanie

Thank you for your question about how to write off job expenses.

Yes, it is true that this would not be considered a bad debt expense. You will typically record this a general job expense. If you would like to track it separately from job expenses that are reimbursed, you can setup a separate reimbursed job expense account.

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Write Off Refund and Over Payments

by Alice
(tennessee)

I have been asked to write off refund checks from a list of checks to be mailed prior to their being cashed.

There is no canceled check but a check number for a check to be sent. I am not comfortable. Any resource info available.

At the same time, they want me to write of over payments and unpaid items in a batch to equal the same amount. Any resource info on this?

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Aug 24, 2023
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starstarstarstarstar 		Financial Accounting Standards Board (FASB)
by: BB

It sounds like you're being asked to perform two separate actions that raise concerns, and it's right to approach them with caution. Here's how you might approach each situation and the related resources you may need:

Writing off Refund Checks Before Being Cashed:

Concern: Writing off checks before they're cashed can create discrepancies in accounting records.

Approach: Usually, checks are written off or voided if they are lost, stale-dated, or in error. If these checks are valid and expected to be cashed, writing them off prematurely is not a standard practice.

Resource: Refer to your company's accounting policies or consult with an accounting professional. The Generally Accepted Accounting Principles (GAAP) may be a good resource for general guidelines.

Writing off Overpayments and Unpaid Items in a Batch:

Concern: Writing off overpayments and unpaid items to equal the same amount as the checks might suggest a balancing act that doesn't reflect actual transactions.

Approach: Analyze each overpayment and unpaid item individually. Determine if they meet the criteria for write-offs according to your company's policies and legal requirements.

Resource: Review your company's write-off policy or consult with an accounting professional. The Financial Accounting Standards Board (FASB) guidelines may also be helpful.

In both cases, transparency, compliance with accounting standards, and adherence to your company's internal policies are crucial. If something doesn't feel right, it's best to consult with a supervisor, accounting professional, or legal expert.

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Write Offs

We provide services and parts for customers. Sometimes we have to do re-work and use parts that we can't charge the customer for. Can we write off the labor and parts? If so, do we write off what we would charge the customer or only the cost (excluding markup) of the parts used? Also, what account would this write off go to? Thank you!

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Aug 24, 2023
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starstarstarstarstar 		Accounting Industry Standards
by: BB

Yes, you can write off the labor and parts used for re-work that you cannot charge to the customer. This is a common practice in business and is considered a business expense. Here's how you might approach this:

Labor Write-Off:

You can write off the actual cost of the labor incurred during the re-work.
This could be recorded in an expense account specifically related to re-work labor or under a more general labor expense account.
Parts Write-Off:

Typically, you would write off only the cost of the parts used, excluding any markup. The markup would be related to the profit you would have made had you charged the customer, so it wouldn't be relevant in this scenario.

This could be recorded in an expense account specific to re-work parts or under a more general cost of goods sold (COGS) or supplies expense account.
Accounting Entry:

The accounting entry would generally involve debiting the relevant expense accounts for re-work labor and parts and crediting your inventory or related accounts for the parts used.

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Write-Off Petty Cash

by Billy
(Augusta, GA)

When I took over bookkeeping, I signed off on $150 Petty Cash. However, there is $200 listed on the Balance Sheet for Petty Cash. Before I noticed this, I found $124 in change, in a file drawer that I deposited into the Operating Account as Anonymous donation. $50 of that may have been Petty Cash. How do I correct the $50?

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Aug 24, 2023
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starstarstarstarstar 		Journal Correcting Entry
by: BB

You can correct the discrepancy in the petty cash account by recording an adjusting journal entry. Here's a general guide on how you can correct the $50:

Identify the Discrepancy: Determine that the $50 deposited as an anonymous donation is actually part of the petty cash.

Reverse the Incorrect Entry: You'll need to reverse the entry where you recorded the $50 as an anonymous donation. You can do this by debiting the anonymous donation account and crediting the operating account.

Adjust the Petty Cash Account: Next, you'll debit the petty cash account for the $50 to bring it to the correct balance and credit the operating account.

The journal entry might look like this:

Debit: Anonymous Donation Account $50

Credit: Operating Account $50

Debit: Petty Cash $50

Credit: Operating Account $50

These entries should correct the petty cash balance and remove the incorrect donation entry.

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Writing Off Creditors

by Ray Regan
(Newmarket, England)

I have three creditors where the debt I owe has been dormant for more than 2 years. The creditors have written off the debt in their books - what entries do I need to clear the amount I owe in my books?

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Aug 24, 2023
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starstarstarstarstar 		Creditor Debt Write Off
by: BB

Certainly! When your creditors have written off the debt and you need to clear the amount you owe in your books, you would make the following entries:

Debit the Liabilities Account: You need to reduce the liability, so you will debit the specific creditors' accounts for the amount that has been written off.

Credit the Income or Equity Account: Since the debt has been forgiven, it can be treated as income or directly credited to equity, depending on your accounting policy and local regulations.

The journal entry might look something like this:

Debit: Accounts Payable/Creditors (specific to the creditor) $Amount
Credit: Other Income or Owner's Equity $Amount
These entries would eliminate the liability and reflect the corresponding income or equity increase.

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Writing Off Deposits

by Barb Drake
(Streetsboro, OH)

Writing Off Deposits

Writing Off Deposits

I have an "other current asset account" that was set up as "prepaid expense deposits".

There is a balance in this account of over 10K which dates back over 5 years that consists of deposits paid to vendors.

I know that there is no chance of getting our deposits back from these vendors so what would the journal entry be to write them off so that it decreases the balance in the current asset account?

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Jul 06, 2018
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starstarstarstarstar 		Writing Off Prepaid Asset Account
by: Stephanie

Thank you for your question about how to write off the prepaid asset account.

Assets typically carry a debit balance, so you would clear the account by the crediting the current asset account and debiting the corresponding expense or equity account.

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Writing Off Of Advance To Suppliers

by Rudra Sen
(Kolkata,West Bengal, India)

What would the correct entry of writing off of Advance to suppliers? In a re-known Company it was found that they started a practice of writing off of such advance through Provision for Bad Debt A/C.

Provision For Bad Debt A/c-- Dr.

To Advance to Supplier A/c


Is the process or accounting procedure is correct? If not
then please provide us the correct details of such, with reference to Accounting Standards.

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Feb 22, 2019
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starstarstarstarstar 		Write off of Advance to Suppliers
by: Anonymous

In my opinion it is operating expense

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