Account Aging Law and Legal Definition

Account Aging usually refers to the methods of tracking past due accounts in accounts receivable. It is the classification of accounts by the time elapsed after the date of billing or the due date. The longer a customer's account remains uncollected or the longer inventory is held, the greater is its realization risk. If a customer's account is past due, the company also has an opportunity cost of funds tied-up in the receivable that could be invested elsewhere for a return. An aging schedule of accounts receivable may break down receivables from 1-30 days, 31-60 days, 61-90 days, and over 90 days. Aging is done for other accounts such as fixed assets and accounts payable. Account aging can also be used in accounts payable, to a lesser degree, to monitor payment history to suppliers.