Accounts Payable Aging


Author: Staff Writer
© <a href="http://www.sophisticatededge.com/accounts-payable-aging.html"></a>

Summary: An Accounts Payable (AP) aging report annotates how much is owed, to whom, and for how long. The report is a key tool in determining precisely the state of affairs for the Accounts Payable department and for the business.

Tags: What Is Accounts Payable, What Is Full Cycle Accounts Payable, Accounts Payable vs Accrued Expense, Accounts Payable Aging, How to Reconcile Accounts Payable

An Accounts Payable (AP) aging report annotates how much is owed, to whom, and for how long. The report is a key tool in determining precisely the state of affairs for the Accounts Payable department and for the business.

Compilation

The AP aging report is a listing usually either by creditor alphabetical order or by amount of all outstanding invoices or bills. The data is pulled onto the report from the AP records entered and updated on a daily basis. False entries result from mistakes made during the normal work routines within the department, which is why accurate data entry and timely updates are necessary.

The first column consists of creditor name-who is owed. The next is generally the total amount outstanding to that creditor. Then the debt is broken down by age with the portion of the total debt that is within 30 days from invoice receipt in the next column, usually labeled "Current." Each sequential column thereafter, commonly called a "bucket," delineates thirty-day increments until 180-plus days.

Account Delineation

For example, to date, ABC Company delivered a total of 15,000 widgets starting five months ago on a special order at $1 each, invoiced in two parts. Of the total $15,000 due, $4,000 isn't yet paid. ABC Company's sample entry on an AP aging might be:

Name

Net Tot

Current

31-60

61-90

91-120

121-150

151-180

180+

ABC Co

4000.00

2681.00

832.59

218.67

167.02

95.74

71.28

0

The original balance total is not listed on the aging entry, because only outstanding debt is required. If the entry on the aging in the Net Total column does list an original balance, it's a new bill that arrived within the last thirty days. If no portion of the total due was paid at the time of delivery, the Net Total column and the Current column would be identical. Because no portion of that vendor's invoice has aged beyond the current time period, only zeroes would be listed in the age buckets.

The complete aging would reflect similar entries for each outstanding creditor, with a total of each column and columns total listed at the end of the report.

Purpose

The purpose of an AP aging report is clear: It outlines how long debts are outstanding and helps prioritize payments. Reducing the aging means reducing liabilities and improving the profit margin and credit lines of any business.

purplearrow

Works Cited

University of Virginia
Other Accounts Reconciliation
http://www.virginia.edu/

Columbia University Finance Gateway
Accounts Payable
http://finance.columbia.edu

Puncel, Luis
Audit Procedures, 2008
Cch, Inc., 2007. Print







purple arrowCite this Article

"Accounts Payable Aging." Sophisticated Edge. N.p., n.d. Web. . <http://www.sophisticatededge.com/accounts-payable-aging.html>.  

The information on this Web site is designed for educational purposes only. It is not intended to be a substitute for informed medical advice or care. You should not use this information to treat or diagnose any health problems or illnesses without consulting a physician. It is not meant to take the place of health care or services you may need. Please consult a physician with any questions you may have regarding your health.

New! Be the First to Follow Us

Sophisticated Media LLC | Copyright © 2009-2014
Privacy Policy | Terms of Service | Contact Us
Sophisticated Blog | Sophisticated Gardening | Sophisticated Manners
Visit Us On: Facebook lTwitter