Write Down

Write down is the concept that is completely opposite to the write up. In write down the book value of the asset is reduced because the value of the asset is already overvalued as compared to the actual and the original market value of the asset. This means that the price of the asset is reduced in order to make its price according to the fair market price. The process of write down usually occur on the financial statement of a company where the value of the asset recorded on the financial statement is written down because the value of the asset recorded on the financial statement is not comparable or equal to the current market price of the particular asset. In such a case the likelihood of receiving the actual cost or the book value of the asset from the market is quite questionable.

The write downs are shown in the income statement of the company under the heading of above the line expense. As a result the write downs reduce the net income of the company. However this must not be considered as a bad thing as write down is mostly a paper loss that lowers or decreases the net income of the company it also helps in reducing the tax burden of the company. Most of the companies attempt to report large number of write downs together so that these companies can take bath in one accounting period and recover from this loss of income in the upcoming accounting period.

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