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Charge-Off
Charge off refers to an unpaid portion of a bill which the lender has decided according to his knowledge will be paid and so recorded as a bad debt in his books. It is also called as bad debtor write off. It is a negative item in the credit report. In other words, they are accounts receivable which cannot be collected and will be written off. They usually appear as expense in a company's income statement.
As a result, the net income is reduced. Companies will come up with an estimation of the current charge off based on the past records for assessing the earnings. Most companies are aware of the factor that recovering all the credits from their creditors is highly uncertain.
In simple words, it is a one time expense which incurred by a company that can adversely affect its earnings. Usually closed bank accounts are also removed from bank records by charging them off.
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