5/7/2019 The accounts receivable aging — AccountingTools

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The accounts receivable aging Search

December 23, 2018

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Controller Library Value Pack
An accounts receivable aging is a report that lists unpaid customer
CFO Library Value Pack
invoices and unused credit memos by date ranges. The aging report is Bookkeeper Library Value Pack
the primary tool used by collections personnel to determine which Financial Analysis Value Pack
invoices are overdue for payment. Given its use as a collection tool, the
report may be configured to also contain contact information for each Accounting Bestsellers
Accountants' Guidebook
customer. The report is also used by management, to determine the
Accounting Controls Guidebook
effectiveness of the credit and collection functions. A typical aging report
Accounting for Casinos & Gaming
lists invoices in 30-day "buckets," where the columns contain the following Accounting for Inventory
information: Accounting for Managers
Accounting Information Systems
Accounting Procedures Guidebook
• The left-most column contains all invoices that are 30 days old or
Agricultural Accounting
less
Bookkeeping Guidebook
• The next column contains invoices that are 31-60 days old Budgeting
CFO Guidebook
• The next column contains invoices that are 61-90 days old Closing the Books
• The final column contains all older invoices Construction Accounting
Cost Accounting Fundamentals
Cost Accounting Textbook
The report is sorted by customer name, with all invoices for each Credit & Collections
customer itemized directly below the customer name, usually sorted by Fixed Asset Accounting
either invoice number or invoice date. A sample report follows, though Fraud Examination
without the individual invoice detail that is usually found in such a report: GAAP Guidebook
Governmental Accounting
Health Care Accounting
0-30 31-60 61-90 90+ Hospitality Accounting
Customer Name Total A/R Days Days Days Days IFRS Guidebook
Lean Accounting Guidebook
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5/7/2019 The accounts receivable aging — AccountingTools

Abercrombie $15,000 $10,000 $5,000 New Controller Guidebook

Nonprofit Accounting
Bufford Inc. 29,000 20,000 9,000 Oil & Gas Accounting
Payables Management
Chesterton Co. 83,000 47,000 21,000 12,000 3,000 Payroll Management
Public Company Accounting
Denver Brothers 8,000 8,000
Real Estate Accounting
Totals $135,000 $57,000 $46,000 $21,000 $11,000 Small Audit Practice Set

Finance Bestsellers
Business Ratios Guidebook
If the report is generated by an accounting software system (which is Corporate Cash Management
usually the case), then you can usually reconfigure the report for different Corporate Finance
date ranges. For example, if payment terms are net 15 days, then the date Cost Management
Enterprise Risk Management
range in the left-most column should only be for the first 15 days. This
Financial Analysis
drops 16-day old invoices into the second column, which highlights that Interpretation of Financials
they are now overdue for payment. Investor Relations Guidebook
MBA Guidebook
The report primarily contains invoices, but it may also contain credit Mergers & Acquisitions
Treasurer's Guidebook
memos that have not been used by customers, or which have not yet
been matched against an unpaid invoice.
Operations Bestsellers
Constraint Management
The aging report is also used as a tool for estimating potential bad debts, Human Resources Guidebook
which are then used to revise the allowance for doubtful accounts. The Inventory Management
usual method for doing so is to derive the historical percentage of invoice New Manager Guidebook
Project Management
dollar amounts in each date range that usually become a bad debt, and
Purchasing Guidebook
apply these percentages to the column totals in the most recent aging
report. Send us your e-mail address
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For example, a company historically experiences 1% bad debts on items in discounts *
its 30 day time bucket, 5% bad debts in its 31-60 day time bucket, and 15%
bad debts in its 61+ day time bucket. Its most recent accounts receivable
aging report contains $500,000 in the 30 day time bucket, $200,000 in
the 31-60 day time bucket, and $50,000 in the 61+ day time bucket. SUBMIT
Based on this information, the company should have an allowance for
doubtful accounts of $22,500, which is calculated as:

($500,000 x 1%) + ($200,000 x 5%) + ($50,000 x 15%) = $22,500

An additional use of the aging report is by the credit department, which

can view the current payment status of any outstanding invoices to see if
customer credit limits should be changed. This is not an ideal use of the
report, since the credit department should also review invoices that have
already been paid in the recent past. Nonetheless, the report does give a
good indication of the near-term financial situation of customers.

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5/7/2019 The accounts receivable aging — AccountingTools

Finally, the company's auditors may use the report to select invoices for
which they want to issue confirmations as part of their year-end audit
activities.

Similar Terms

An accounts receivable aging is also known as a schedule of accounts

receivable. A variation is that this schedule may contain a simple listing of
receivables by customer, rather than breaking them down further by age.

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Credit and Collection Guidebook

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