How to Write Off Dead Stock and Dispose of Unsellable Inventory
Removing completely unsellable inventory from the books by drawing against the allowance account.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Allowance for Slow-Moving Inventory | Contra-Asset (-) | 2,000.00 | - |
| Merchandise Inventory | Asset (-) | - | 2,000.00 |
💡 Accountant's Note
When physically disposed, the inventory and its associated provision are both removed. If no provision exists, the full cost is expensed directly to Inventory Loss Expense.
Practitioner & Systems Framework
💻 ERP Architecture
Dead stock write-offs require both a physical disposal event and an accounting entry. In the ERP, close out the inventory location for the disposed items and post the write-off against the existing Allowance for Slow-Moving Inventory. If the write-off exceeds the provision (i.e., items without a prior provision), the excess is expensed directly to Inventory Loss Expense. For tax purposes in Jordan, disposal evidence is required to support the deduction.
⚠️ Audit Flags
Auditors require physical disposal evidence: (1) Destruction certificate (for products that cannot be donated or returned), donation receipt (for items given to charity), or liquidation invoice (for items sold below cost). Writing off inventory without physical disposal evidence is a significant audit finding — the items may still exist and could be misappropriated.
📄 Required Documentation
Disposal authorization signed by management, physical disposal evidence (destruction certificate, donation acknowledgment, or liquidation sale invoice), write-off journal entry linked to the specific inventory items, prior provision balance confirming the allowance was available to absorb the write-off, and ISTD guidance on tax deductibility of inventory write-offs in Jordan.
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Expert Analysis by Qusai Ahmad
General Accountant Supervisor & IFRS Specialist
Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.