What Is the Aging of Accounts Receivable Method? In accounting, aging of accounts receivable refers to the method of sorting the receivables by the due date to estimate the bad debts expense to the business. Accounts receivables arise when the business provides goods and services on a credit to the clients.
Herein, why is aging of accounts receivable important?
An aging report is useful because it gives you a snapshot of the money that is outstanding and due to you by your customers. It also helps you identify customers that are falling behind on their payments – a clear sign of an underlying problem.
Secondly, how is aging used in accounting? The aging method sorts each customer’s unpaid invoices by invoice date into perhaps four columns:
- Column 1 lists the invoice amounts that are not yet due.
- Column 2 lists the invoice amounts that are 1-30 days past due.
- Column 3 lists the invoice amounts that are 31-60 days past due.