What is Aging of Accounts?

Aging of accounts is the technique to classify accounts according to billing or due date. In this classification, we get the idea to whom, we have to get first and to whom, we have to pay first. There are main three types of Aging of Accounts

1st Aging of Receivable Accounts

In aging of receivable accounts, we fix the time to collect money from our different customers. If our customers remain uncollected, it may be bad debt. That is the reason, company makes aging schedule for accounts of debtors. An aging schedule of accounts receivable may break down receivables from 1-30 days, 31-60 days, 61-90 days, and over 90 days.

An Account Receivables Aging Report or schedule is used by a business to show how long an invoice for payment has been outstanding. This aging of receivable accounts is also helpful to estimate net  bad debts.

2nd Aging of Payable Accounts

Aging of payable accounts is simple a sorting of a company's accounts payable by due date. Accounts Payable aging report is useful to  the management to evaluate that which of there payments are going to due at which date in this way this helps the management to manage the amount requires to pay when they are due to pay.

3rd Aging of Inventory

With regard to inventory, if it is held too long, obsolescence, spoilage, and technological problems may result.