What does it mean to write off an account?

Writing off an account means canceling the balance of a customer account due to non-payment. This typically occurs when it is determined that the amount owed by a customer is uncollectible, often after exhausting all reasonable collection efforts. When a business writes off an account, it acknowledges that this debt will not be recovered, and therefore removes it from its accounts receivable.

This process impacts financial statements, as the business will typically record a loss on its income statement and reduce the accounts receivable balance on the balance sheet. Writing off accounts helps in maintaining accurate financial records and provides a clearer picture of the company's actual collectible assets.

The other choices do not correctly capture the essence of what it means to write off an account. Increasing revenue, decreasing liabilities, and converting accounts receivable into cash relate to different aspects of financial management and accounting practices, but they do not specifically refer to the action of writing off a bad debt.