AGING OF ACCOUNTS Definition

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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.

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CASH EARNINGS is cash revenues minus cash expenses. This differs from earnings in that it does not include non-cash expenses such as depreciation.

MISSTATEMENT is a difference between the amount, classification, presentation, or disclosure of a reported financial statement item and the amount, classification, presentation, or disclosure that is required for the item to be in accordance with the applicable financial reporting framework.

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