Definition
An inventory write-off removes stock that is lost, damaged, expired or stolen from the books, recording its cost as an expense.
What is an inventory write-off used for?
Write-offs make the stock records match reality and show the true cost of shrinkage. Each one should carry a reason, so management can see whether losses come from handling damage, theft, expiry or something else, and a value at cost.
Example: a warehouse writes off 12 cartons of sealant past expiry, valued at GBP 230, with the reason Expiry.
A write-down is different: the goods still exist but are now worth less than they cost. Large or frequent write-offs usually need a manager’s sign-off, and both reduce inventory valuation.