In the world of business, an accounts receivable aging report is a very important statement that is used to record data related to the debtors of a business. Here, we have provided a sample aging report that will help you draft one for yourself.
The business world works on the basis of debtor-creditor transactions. Commercially speaking, this relation between the two businessmen is of utmost importance due to the fact that it helps businessmen source goods and services even when there is no availability of money. Let us take an example. ‘A’ is a businessman who whole sells fabrics to manufacturers. ‘B’ is a businessman who owns a workshop that manufactures T-shirts. Now, B approaches A and requests him to dispatch a said quantity of cotton fabrics. A and B enter into a legally enforceable contractual agreement which states that B shall pay to A the decided amount as a consideration (money) for the fabric, in a given period of time. This agreement between A and B is often termed as a debtor-creditor relationship, and A is said to have provided B with a credit extension.
The advantage of such a situation is that when B receives a purchase order from one of his clients, he needs fabric in order to manufacture the T-shirts. As he does not have any money to buy some, A extends him with credit. B is able to produce T-shirts for his client. In due course, B’s client will pay him for the T-shirts and B will then pay A the required sum.
What is an Accounts Receivable Aging Report?
As mentioned and elaborated above, the debtor-creditor relationship is a key instrument that keeps businesses alive. The aging report is a statement that records the number of debtors and the amounts that they owe to the creditor. This report is essentially an in-house statement that is maintained by the accounts department of the creditor. The statement helps the creditor to get a summarized view of all the debtors and the amounts that they owe. The following is an accounts receivable aging template.
Name of Company/ establishment/ businessman
Report of Accounts Receivable as of: Date on which report is prepared
|Customer Name and Accounting Folio Number
|Total Amount Receivable
|Current Amounts Pending
|1 to 30 days Amounts Payable
|31 to 60 Days Amounts Payable
|Over 60 Days Amounts Payable
|400 + 10% p.c.p.m
All amounts in USD.
Reading the contents of the table is fairly easy. The first column is, of course, the serial number of the debtor. The second one is for the folio number and company name. The folio number is a number or a code that is assigned by the company for administrative convenience. The current amounts pending column is the unreceived amounts of the ongoing month. The subsequent columns are for the preceding months. You will notice that in one of the cells an interest has been levied on the unpaid amount. Businessmen often levy such interest rates in case of unreliable clients.
The reason why an aging report is not needed for an audit because the ledger book and balance sheet contains all the debts and related accounts. However, if the auditor feels like simplifying the process, he might request an aging report.