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Aging Method of Calculating Doubtful Debts - Assignment

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Added on  2021-06-18

Aging Method of Calculating Doubtful Debts - Assignment

   Added on 2021-06-18

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Aging Method of Calculating Doubtful Debts 1UniversityAging Method of Calculating Doubtful DebtsAuthorDateProfessor’s nameProgram of Study
Aging Method of Calculating Doubtful Debts - Assignment_1
Aging Method of Calculating Doubtful Debts 2Aging Method of Calculating Doubtful DebtsDoubtful debts refer to the total sum of money that a business does not expect to receive from its customers. It is an operating expense that can be documented in a financial statement when a customer is facing financial difficulties. Debts are classified to be doubtful when the certainty of receiving its payment is not definite. Doubtful debts arise in the period following the sales. In current accounting, there are two methods of estimating doubtful debts (Budhathoki 2018). The percent of receivables and sales approach and the aging of accounts receivable process.The accounts receivable aging method estimates doubtful debtsthrough the classification of receivable accounts of a business basing on the duration for which the debts have been outstanding, followed by the evaluation of the possibility of not collecting the payment for each category. This helps with the identification of clients in the business who take longer than the required period to pay for services so that sales restrictions can be implemented. The aging of accounts method involves analyzing debt reports and grouping them as either not due or past due. Past due accounts are classified further in terms of the length of the period they are past due (Kulikova et al. 2015).Standard classifications used in the method include; payment not due which refers to the amount of money the client has within the range of pay. In the event the payment is due past the requireddate, the periods are classified in the order of 30 days past the due payment dates(Simplestudies.com, 2014). Table 1 below illustrates a sample aging accounts receivable method for analyzing doubtful debts.
Aging Method of Calculating Doubtful Debts - Assignment_2

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