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What is an Aging Schedule?

An Aging Schedule, often called an Accounts Receivable Aging Report, is a tabular representation of a company’s accounts receivable balances classified by the length of time the receivables have been outstanding. It categorizes receivables into different age groups, typically in increments such as 30 days, 60 days, 90 days, and beyond, providing insights into the timing of expected payments.

Why is it important or used in Accounting?

Aging Schedules are important in accounting for several reasons:

Advantages of Aging Schedule:

Disadvantages of the Aging Schedule:

Example of Aging Schedule for a Wholesaler or Retailer Business:

Let’s consider a wholesaler that supplies electronic goods to various retailers. At the end of the month, the wholesaler prepares an Aging Schedule to categorize its outstanding receivables:

This Aging Schedule indicates that a significant portion of the receivables is in the 31-60 days category, suggesting potential issues with these specific customers. The wholesaler can use this information to focus its collection efforts on customers in this category, implement targeted strategies for improving payment timelines, and maintain a healthier cash flow.

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