Aging is a method used by the investors and accountants to check the financial health of the company either to understand its future prospects or to keep a check on the company. This method prevents a company from following any unethical means to reduce taxes. It also helps a company from having high amount of bad debts and identifying the problems within the company’s credit policy.
Accounts receivables is the amount which is due to be received by the company after providing the services or goods. In simple terms it is the cost which is to be received by the company of the goods or services which the company had sold on credit.
Aging is a method to check the accounts receivables in any company.
The aging report will consist of the information of the sale done on credit by the company. Information like the customer name, customer outstanding balance, 1- 30 days past due, 31 – 60 days past due, 61 – 90 days past due, etc. are included in the aging report.
Aging helps in identifying bad debts in a company and also portrays a realistic picture of the finances of the company.