What is the primary purpose of an accounts receivable aging report?
The primary purpose of an accounts receivable aging report is to lists some of the customers that have unpaid debt invoices and also available credit memos listed in by date ranges. An aging report is a primary document that is valued by the collection personnel since it helps them in determining which invoices that deadlines have passed are require to be paid. The simple fact that it is used as a collection tool does not mean that they cannot store contact information for any given customer. The document is also very useful to the management department since it is used to determine or evaluate how effective the credit and collection functions are performing ( Biafore, 2011) .
The report is also very useful to the organization since it determines some of the potential bad debts, thus allowing the management to revise all the allowance for doubtful accounts amicably. A good approach that can effectively work well would be through deriving actual percentage invoices dollar amounts from the listed date range; thus they change and become the bad debts; therefore the percentages should be applied to the column total completed in most recent aging reports.
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When should outstanding accounts be written off?
There are some of the customers that come to the business take things that eventually are not paid at all in the long run. Therefore, an organization requires allowing for and or writing off the unpaid accounts receivable; the organization requires accurate recording and taxes while the financial statements should also be right. Generally accepted accounting principles (GAAP), have come up with some of the rules to guide and have standards that are used in recording and reporting any type of transaction involving financial information. GAAP rules are based on specific assumptions regarding any given business. It must be run like a single economic entity that does not involve or include the owners’ personal belongings such as assets and liabilities.
Full disclosure should be made with footnotes and statements after the figures in a case where there are incomplete transactions, pending lawsuits and any other cause as to why the business is not showing the status. GAAP use a form of accrual base for accounting, therefore, using a transaction base when it occurs and not when cash has been used in a transaction.
What controls are needed in handling aged accounts?
Account controls start when there is a creation of a customer invoice for accounts receivables, the reason being is since there are certain things that must be minimized at the inception of accounts receivable for comprehensive control that will be set to the key asset. Controls set are used to maintain the accounts receivables, also their elimination that is done through payments from the customers and or other generations done through credit memos. Proofread invoices are made when a large-dollar amount has brought about an error, any given customer that has dealt with the organization may decide to hold the payment up until the invoice with errors has been cleared or revised. Verification of contract terms is done when there is an occurrence of important payment term, for the reason of verification before the invoice can be created. The reason for avoiding transaction in the accounts receivables that customers have refused to pay.
Reference
Biafore, B. (2011). QuickBooks 2011: The missing manual . Beijing: O'Reilly.
