What does aging of accounts receivable refer to?

• A. Aging of outstanding customer invoices to assess collectability
• B. The aging of accounts payable
• C. The age of contracts
• D. The depreciation schedule of assets

Answer: (A)

Aging of accounts receivable means grouping the money customers owe you by how long it has been outstanding to evaluate how collectible it is. You’d sort receivables into buckets such as current, 1–30 days past due, 31–60 days, 61–90 days, and over 90 days. The idea is that the longer an invoice remains unpaid, the higher the chance it won’t be collected, so older buckets influence the estimate of doubtful accounts and bad debt expense. This aging also helps with cash flow planning and deciding which accounts to follow up on or take action against. It’s not about money you owe to others (accounts payable), the age of contracts, or asset depreciation.