12 July 2008
Ageing is done to analyse the Debtors' outstandings. On the basis of agewise classification one can know the healthy state of debtors of any organisation. Any organisation having debtors with long outstandings shows that recoveries from debtors are not effective. It may also pointout certain debtors which may further be classified as bad or doubtful debtors. Now, the ageing of debtors may be done by scanning the debit entries backward upto the entry where the cumulative of entries is equal to the balance outstanding. The date of this entry will suggest the ageing period of the balance. Moreover, the balance may further be classified for dues with age of 90 days or 180 days and like that. This all depends on the scope of the analysis. Generally limits availed from a bank on book debts are analysed on this basis.
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