charge off

Definition

Accounts receivable that will likely remain uncollectable and will be written off. Charge offs appear as an expense on the company's income statement, thus reducing net income. In general, companies make an estimate of charge off expenses that might be incurred in the current time period based on past records as part of the process of estimating earnings. Most companies make a charge off allowance since it is unlikely that all of their creditors will pay them in full. also called bad debt.

Use charge off in a sentence

My boss told me that we could treat our sales to Sam's Grocery as a charge off because Sam had just gone bankrupt and would not be able to pay.

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When the gambling addict declared personal bankruptcy due to substantial losses at Blackjack, the casino had to take a charge off on his $15,000 debt, as the addict had few assets and numerous creditors.

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Our accounts receivable department has utilized both written and oral communications to our customers resulting in an overall decrease in charge offs since the prior year.

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