Shmoop Finance
Make Moolah, Not War
Word of the day: Inventory Write-Off
You never should have bought what you thought was only 1-day-old shrimp to then sell on the side of the road to hungry beach-goers over the weekend. Normally, you sold chili, which "kept" a long time. But uh, not so much for that shrimp.
It was the smell that first gave away its harvest date, which was probably a week ago. So that $18,000 worth of Franzi Shrimp? Yeah. A total inventory write-off.
From an accounting perspective, it's as if you had a load of expenses ($18,000), which then produced zero revenues. You held it as being worth 18 grand on your balance sheet, and the moment you knew it wasn't, uh, sellable...well, you just wrote it off as being worth zero, hoping that there wouldn't be incremental expenses to dispose of it. Luckily, Todd's Cat Show happened to be driving by and, well, at least Franzi made somebody happy.