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Net Accounts Receivable: Aging of Receivables Method definitions

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  • Aging of Receivables Method
    Balance sheet approach estimating uncollectible accounts by categorizing receivables based on age and applying specific uncollectibility percentages.
  • Allowance for Doubtful Accounts
    Contra-asset account reflecting the estimated amount of accounts receivable expected to be uncollectible.
  • Bad Debt Expense
    Amount recognized in the period to adjust the allowance for doubtful accounts to the required ending balance.
  • Aging Schedule
    Table categorizing accounts receivable by age groups and assigning uncollectibility percentages to each group.
  • Uncollectibility Percentage
    Estimated likelihood that receivables in a specific age category will not be collected.
  • Gross Accounts Receivable
    Total outstanding amounts owed to a company by customers before deducting any allowance for doubtful accounts.
  • Balance Sheet Approach
    Method focusing on estimating uncollectible accounts based on the accounts receivable balance rather than sales.
  • Ending Balance
    Final amount in the allowance for doubtful accounts after considering beginning balance, bad debt expense, and write-offs.
  • Beginning Balance
    Amount in the allowance for doubtful accounts at the start of the period, used in calculating adjustments.
  • Write-offs
    Amounts removed from accounts receivable and the allowance for doubtful accounts when deemed uncollectible.
  • Journal Entry
    Accounting record debiting bad debt expense and crediting allowance for doubtful accounts to reflect estimated uncollectibles.
  • Contra-asset Account
    Account that reduces the balance of a related asset, such as the allowance for doubtful accounts reducing accounts receivable.
  • Net Accounts Receivable
    Amount expected to be collected from customers, calculated as gross accounts receivable minus the allowance for doubtful accounts.
  • Credit Balance
    Normal balance for the allowance for doubtful accounts, indicating the amount set aside for potential uncollectibles.
  • Age Category
    Grouping of receivables based on how long amounts have been outstanding, used to assess collection risk.