Understanding The Difference Between A Write Off And A Write Down

I wanted to take a look at the difference between a write off and a write down following Toshiba's write-down warning. So lets start with a write off which is a reduction in the recorded amount of an asset. A write off occurs upon the realization that an asset no longer can be converted into cash, can provide no further use to a business, or has no market value. A write off is accomplished by shifting some or all of the balance in an asset account to an expense account.

A write off is required when an account receivable cannot be collected, when inventory is obsolete, where there is no longer any use for a fixed asset. Now lets look at write down which is the downward revision of the book value of an asset to reflect its current market value that has dropped below the book value. The amount by which the book value is reduced is charged against the earnings as an expense or loss. To learn more about write off and write down click on the pictures below to read the articles.