AGING OF ACCOUNTS Definition

Bookmark and Share

AGING OF ACCOUNTS is the classification of accounts by the time elapsed after the date of billing or the due date. The longer a customers account remains uncollected or the longer inventory is held, the greater is its realization risk. If a customers account is past due, the company also has an Opportunity Cost of funds tied-up in the receivable that could be invested elsewhere for a return. An aging schedule of accounts receivable may break down receivables from 1-30 days, 31-60 days, 61-90 days, and over 90 days. With regard to inventory, if it is held too long, obsolescence, spoilage, and technological problems may result. Aging can be done for other accounts such as fixed assets and accounts payable. See also ACCOUNT AGING.

Learn new Accounting Terms

REVENUE JUSTIFIED is where the revenue realized from a product or service will pay for the cost and expenses of that product or service, i.e. the product or service will pay for itself.

SHIP IN PLACE is sales billed to customers prior to delivery and held by the seller (also: "bill and hold" or "bill in place" sales).

Suggest a Term

Enter Search Term

Enter a term, then click the entry you would like to view.