12 March 2010
Age analysis of debtors is conducted to analyse the spread in which the debtors are dealing with the company. Debtors which are within due date are considered as good. Generally, no provision for doubtful debts is made in the books if the Debtors are due for less than 6 months but are considered as goods. For Debtors which are due for more than six months, the auditors would prefer the company to provide clarifications and a mgt declaration letter that the debtors are recoverable.
From the company's point of view: the company can keep a track of outstanding debtors on the basis of ageing analysis and keep a focus on debtors which are older.
Average period in which the debtors are realised is also obtained from this details as also to understand the average credit period enjoyed by the debtors.
The importants of doing agewise analysis is to track our outstanding payment from debtors. By using this report we can see how much is going to be doubtfull and recovereble.
Through this reprot we can analyse the credit worthyness of a party and how much time he is taking to clear his dues..
You have to always do followup with the party whose o/s is more than one month...
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