Learn the Necessary Accounts Payable/Receivable Lingo

Accounts Receivable (AR)

Accounts receivable represents money owed by customers to whom the business has provided goods or services on credit. Usually the amounts are

Accounts Receivable Ledger

The accounts receivable ledger is a detailed listing of amounts owed by customers.

Aging of Accounts Receivable

Aging is accounts receivable analyzed by due date. Typically the due dates are grouped by monthly periods, such as 30, 60, 90, and 120-plus days past due. If your 120-plus aging is usually under 1 percent of total receivables but has recently jumped to 5 percent, it usually indicates a collections problem.

Bad Debts

Bad debts are usually former doubtful accounts receivable that are now considered to offer little or no prospects for collection. The bad debts are written off, removing them from both the allowance for doubtful accounts and the accounts receivable listing. “Bad debts expense” is the charge against income that adjusts the allowance for doubtful accounts to the estimated total amount of uncollected AR.