Writing off intangible assets
This query is : Resolved
22 September 2018
Hi Sir/ Madam,
I have a tangible asset of Rs. 7,00,000 in my Balance Sheet after netting off the Accumulated Depreciation
Now I want to close the company by Writing off the Assets & Liabilities
So can any one let me know the Entry for Writing off the Intangible Assets of Rs. 7,00,000
1. Whether it should be written off to P & L Account ? if yes under which Ledger head
2. Otherwise should it be adjusted against Reserves & Surplus ?
Awaiting for your Reply...
I have a tangible asset of Rs. 7,00,000 in my Balance Sheet after netting off the Accumulated Depreciation
Now I want to close the company by Writing off the Assets & Liabilities
So can any one let me know the Entry for Writing off the Intangible Assets of Rs. 7,00,000
1. Whether it should be written off to P & L Account ? if yes under which Ledger head
2. Otherwise should it be adjusted against Reserves & Surplus ?
Awaiting for your Reply...
03 August 2025
Hey! Here’s how writing off intangible assets usually works when closing a company:
1. Writing off Intangible Assets:
If you write off intangible assets (like goodwill, patents, trademarks), the usual accounting treatment is to write off the net book value (NBV) to the Profit & Loss Account as an expense.
This reduces your profits or creates a loss, which reflects the economic reality that the asset no longer has value.
2. Journal Entry for Writing off Intangible Assets:
Dr. Profit & Loss Account (Expense) Rs. 7,00,000
Cr. Intangible Assets Account Rs. 7,00,000
3. Should you adjust against Reserves & Surplus?
Normally, no. The asset write-off impacts the P&L because it’s a loss/expense.
However, in some cases (like a capital write-off on company liquidation), the write-off can be made directly to Reserves & Surplus or a Capital Reserve account, but this needs approval and depends on your company’s accounting policies and applicable laws.
This is less common and usually done only when there is no profit or loss impact desired (e.g., at the time of winding up).
Summary:
Treatment When to Use
Write off to P&L Account Normal write-off during operations
Adjust against Reserves During company closure/liquidation with proper approval
If your company is closing and you want to avoid showing loss in P&L, you may need to consult with your auditors or legal advisor about adjusting against Reserves.
1. Writing off Intangible Assets:
If you write off intangible assets (like goodwill, patents, trademarks), the usual accounting treatment is to write off the net book value (NBV) to the Profit & Loss Account as an expense.
This reduces your profits or creates a loss, which reflects the economic reality that the asset no longer has value.
2. Journal Entry for Writing off Intangible Assets:
Dr. Profit & Loss Account (Expense) Rs. 7,00,000
Cr. Intangible Assets Account Rs. 7,00,000
3. Should you adjust against Reserves & Surplus?
Normally, no. The asset write-off impacts the P&L because it’s a loss/expense.
However, in some cases (like a capital write-off on company liquidation), the write-off can be made directly to Reserves & Surplus or a Capital Reserve account, but this needs approval and depends on your company’s accounting policies and applicable laws.
This is less common and usually done only when there is no profit or loss impact desired (e.g., at the time of winding up).
Summary:
Treatment When to Use
Write off to P&L Account Normal write-off during operations
Adjust against Reserves During company closure/liquidation with proper approval
If your company is closing and you want to avoid showing loss in P&L, you may need to consult with your auditors or legal advisor about adjusting against Reserves.
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