Goods write-off document: when to use it and when not to use it

How to use the goods write-off document correctly

If the write-off document in Torgsoft is used to correct any accounting error, it almost always results in distorted profit figures and confusion in stock balances. A write-off should be used only when goods have actually been lost, damaged, withdrawn, or can no longer be returned to sale, not when an employee has made an error in an incoming invoice, a return to a supplier, or while adjusting warehouse balances. Therefore, before creating a write-off document, it is important to determine whether the goods have actually been lost or whether the issue is an error that should be corrected using another document.

What write-offs are used for in accounting

A write-off (Document - Write-off Goods from Warehouse) — is a separate adjustment document intended exclusively for actual defects, damage, loss, expired goods, or goods withdrawn by the owner for personal use.

Every write-off directly affects financial indicators:

• Impact on stock balances. The goods are removed from the warehouse immediately after they are added to the write-off document.

• Impact on cost. Goods are always written off at the purchase price according to the FIFO principle.

• Impact on profit. This is the most important point. The amount of the written-off goods at their purchase price is deducted from your total goods profit. Profit formula: 

Profit = Sales Amount - Returns Amount - Cost of Sales + Cost of Returns - Write-off Amount.

How the problem appears in accounting and reports

• «The monthly report shows a negative or significantly understated profit».

• «A barcode was accidentally scanned into the quantity field, and now we are trying to write off a million units of goods».

Detailed signs:

• The Analysis - Period report or the Goods Write-off Report contains enormous write-off amounts that did not physically occur in the store.

• The warehouse balances do not match the actual stock because the goods were «written off», then found and sold again.

• The debt to the supplier did not decrease even though the defective goods were returned because a «Write-off» was created instead of a «Defective Goods Return».

When write-offs are used incorrectly

A. Correcting goods receipt errors (the most common case)

The user made an error when creating an incoming invoice, for example, entered 100 units instead of 10 or scanned the product barcode instead of entering the price, creating a batch worth millions. Instead of opening the invoice and correcting the value, the user creates a write-off document for the «excess» goods. This immediately generates a fictitious loss.

B. Substituting return documents

Goods or defective goods are returned to the supplier, but a Goods Write-off is created in the software instead of a Return Goods to Supplier or Defective Goods Return. As a result, the goods leave the warehouse, but the settlement balance, meaning the debt to the supplier, remains unchanged.

Action plan: how to check and correct the incorrect use of write-offs

Step 1. Find incorrect write-off documents

1. Open Warehouse - Expense List.

2. In the «Type» filter, select Write-off.

3. Review the documents for the period in question.

Step 2. Delete incorrect write-offs

1. Select the incorrect write-off document.

2. Click Delete. The goods will automatically be returned to the warehouse.

Step 3. Resolve the problem using the correct document

• If there was an error in the incoming invoice: open Warehouse - Incoming Invoice Register, open the invoice for editing, and correct the product quantity.

• If the goods were returned to the supplier: create Document - Return Goods to Supplier.

• If there is a product mix-up or negative stock in the warehouse: create Document - Inventory Statement. After entering the actual balances and closing the statement, the software will automatically generate the correct goods receipt and write-off documents.

Step 4. Create the correct write-off if the goods were actually lost

1. Open Document - Write-off Goods from Warehouse -> New Write-off.

2. Select the counterparty named «write-off» in the «Write-off» field.

3. Add the lost goods to the write-off document.

How to check that accounting and profit have been restored correctly

• Open Analysis - Period, select the current month, and check the «Goods Profit» indicator. It should reflect the actual situation and should not be understated by the amount of the corrected errors.

• Check Warehouse - Warehouse Status — the quantity of goods should match the actual stock.

• Open Payment - Balance with Partners and make sure that the debt to suppliers has decreased if you replaced an incorrect write-off with the correct «Return to Supplier» document.

How to prevent incorrect write-offs in the future

1. Prohibit sales into negative stock. To avoid confusion with stock balances, open Settings - Parameters - Accounting and set Prohibit sales into negative stock in the «What to do if there are insufficient goods in the warehouse» field.

2. Restrict salesperson permissions. Open Settings - Role Settings and remove access to creating write-off documents from the salesperson role. Only the owner or a senior administrator/merchandise manager should be permitted to write off goods.

3. Train your staff. Explain the rule: "If you make an error in a document, edit or delete that document. A write-off is created only when the goods are physically being discarded."

4. Adjust warehouse balances only through inventory counts. For any unexplained discrepancies, use the Inventory Statement — this is the only correct way to reconcile the system records with the actual stock.

Frequently asked questions about goods write-offs

A write-off is created when you know the exact reason why specific goods were lost: they were damaged, broken, expired, or taken by the owner for personal use. In other words, it is a specific adjustment made after damage or loss has been identified.

An inventory count should be performed periodically to compare the actual warehouse balances with the accounting data in the software. If a shortage is found during the inventory count, the software will automatically generate a write-off document for the missing goods after the statement is closed.

To write off such goods, open Document - Write-off Goods from Warehouse and click New Write-off. Select the counterparty named «write-off» in the «Write-off» field and add the lost goods using a barcode scanner or select them manually from the warehouse status.

As soon as the goods are added to this document, they are immediately considered written off from the accounting center. Additionally, in the "Write-off Goods from Warehouse" form, after adding all goods to the document, you can click "Calculate Cost for Written-off Goods" so that the correct purchase price is immediately entered for the written-off goods in the document instead of waiting for these prices to be filled in after the automatic cost calculation is performed in Torgsoft.

Yes, a write-off directly affects the store’s financial results. The total value of the written-off goods at their purchase prices is fully deducted from your total goods profit.

The software calculates goods profit using the following formula: sales amount minus returns amount, minus cost of sales, plus cost of returns, and minus the write-off amount at purchase prices.

In Torgsoft, the date, period, and number fields in a write-off document are filled in automatically using the current time, but you can change the values in these fields manually when creating the document if necessary. You can also edit the date of an existing write-off by finding it through Warehouse - Expense List and using the Change Date and Time button.

However, writing off goods retroactively in already closed periods or months is not recommended because it may affect the financial reports for previous periods. If you have nevertheless created a retroactive write-off, be sure to recalculate the cost in Torgsoft.

All created write-off documents can be found in Warehouse - Expense List. Set the required period and select Write-off in the "Type" filter — the software will display all relevant documents and their contents in the lower part of the window.

For more detailed analysis and printing, use Report - Goods Write-off Report. There, you can group write-offs by product or production document and view the total quantity, amount, and cost of the written-off goods for the selected period.

A write-off means that the goods have been physically lost, damaged, or withdrawn — their cost is recorded as a loss and is fully deducted from the store’s goods profit. Settlements with suppliers remain unchanged.

A return, processed through Return Goods to Supplier, means that you physically return the goods to the counterparty. In this case, the value of the returned goods reduces your debt to the supplier and is not considered a loss for your business.

Permission to create write-off documents is controlled by the role settings in the system. By default, the Owner or senior system administrator has full access to this functionality.

To prevent misuse and attempts to conceal errors or theft, it is recommended to restrict ordinary salespersons and cashiers from creating write-off documents in Settings - Role Settings. For reliable control, the salesperson should report damaged goods, while the actual write-off from the warehouse should be performed by the materially responsible employee, such as the merchandise manager or owner.