Impairment
Definition
A reduction in an asset's carrying amount when its recoverable value falls below what the books show. The write-down is recognised as a loss, keeping assets from being overstated.
Related Terms in Core Accounting
Deferred Tax
A balance arising from timing differences between how items are treated in the accounts and in the tax computation. Deferred tax liabilities represent tax expected to be paid later; deferred tax assets, tax expected to be recovered.
Suspense Account Usage
The practice of temporarily holding a transaction in a suspense account when its correct classification is unclear, then clearing it to the right account once resolved. A suspense balance at period end signals unfinished work.
Write-Down
Reducing the recorded value of an asset to reflect a fall in its worth — for example inventory to net realisable value — without removing it entirely. A full removal is a write-off.
Capital Account
The equity account recording the owners' investment in a business and their share of accumulated profits. In partnerships and proprietorships it tracks contributions, drawings and profit shares per owner.
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