Financial statements are used to communicate accurate and reliable financial information to end users in an efficient and effective manner. Often, financial statements intended to help end users internal to the organization differ from those intended to help external end users because of differing needs and focuses. Accounts receivable reports, also called aging accounts receivable reports, are financial statements intended to help management understand the chances of collecting on short-term debts owed to its organization. Information needed to prepare such reports can be either calculated or found on source documents such as bills and receipts.
An account receivable is a current asset representing a sum of cash that the business is entitled to collect because it has sold its products to a customer on credit. For example, if a business sells $200 in products to a customer on credit, the business records $200 in sales revenue and $200 in accounts receivable. Most businesses record all accounts receivable as a single account on their balance sheets, but separate them into separate transactions on the aging accounts receivable report.
Aging Accounts Receivable
Sales made on credit must be considered calculable and collectible before their values can be recorded as revenue and accounts receivable on the accounting ledger. But sometimes, estimates turn out to be incorrect and accounts receivable become uncollectible. Aging accounts receivable refer to accounts receivable past their due dates and are thus considered to possess increased risks of the customer defaulting on the debt -- the longer the account is overdue, the higher the chance that it is uncollectible.
Accounts Receivable Report
Accounts receivable reports are used to detail a business' outstanding accounts receivable in order to present a complete picture of its short-term debtors and their debts. Each account receivable is listed with the customer's name, the outstanding balance and the time since it has become overdue. In most cases, accounts are classified in categories rather than a specific time listed since becoming overdue. For example, accounts receivable that are 32 and 36 days overdue might be classified together under Over 30 Days Overdue while an account receivable that is 67 days overdue might be classified under Over 60 Days Overdue.
Data on the Accounts Receivable Report
Customer name, outstanding balance and the time since the account has become overdue are the most important data, but not the only data that is made available on aging accounts receivable reports. Other data might include the transaction's invoice number, the transaction's original balance, and notes on the customer and the customer's past accounts receivable with the business. Businesses might also choose to rearrange the order of the listed accounts receivable based on different factors such as the customer and the length of time since the account has become overdue in order to emphasize certain factors about the information in their presentation.
Alan Li started writing in 2008 and has seen his work published in newsletters written for the Cecil Street Community Centre in Toronto. He is a graduate of the finance program at the University of Toronto with a Bachelor of Commerce and has additional accreditation from the Canadian Securities Institute.