Aging of Accounts Receivable

Definition

A method of estimating bad debts by categorizing receivables by how long they've been outstanding (0–30 days, 31–60 days, etc.). The older the receivable, the less likely you'll collect it.

Related Terms

Allowance for Doubtful Accounts

A contra-asset account that estimates how much of your Accounts Receivable you'll never collect. It's like setting aside a rainy-day fund for customers who ghost you. Appears on the balance sheet as a reduction to A/R.

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