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audit

Shikha Bajaj (CA ) (433 Points)

17 February 2010

Can anyone explain how to calculate debtors ageing?

How is it useful as an audit tool?

Thanks in Advance!

Shikha

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Ashish M (Chartered Accountant) (2731 Points)
Replied 17 February 2010

if u r asking abt the feature in tally,

Dr.s's ageing is the time period the concern takes to recover the money from the Dr.'s.

For example, a party is Dr. @ a certian date and the time the party is credited, the period is calculated by tally as the drs's ageing..

It is helpful as an audit tool as it tells the time period the concern took to recover the money from the party, so the auditor can ask the accountant about the Dr.'s with long ageing period and the reasons thereof.

MOre so, the same can be compared with both the parties agreements.

For example, while selling the goods, or the Purchase order received frm a party, it contains that the payment will be made within a week or 15 days or so. complaring it with the parties reciept, we can find if the payment took more days than the same mentioned above, (other than in running account system), their may be lack of internal control in the concern regarding receiving payments frm Drs.'

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Amol Gopal Kabra (CA,CS,DISA) (Practicing CA) (8539 Points)
Replied 19 February 2010

Debtors ageing means classifying the debtors on the basis of number of days the amount is outstanding. It is a good toll not only for audit but also for own purposes of any organisation as it calculates the efficiency of the company in recovering the sales proceeds / debts. Debtors ageing, depending upon policy to policy, calculates the debtors in various groups like older than 6 months, less than 6 months, 1 yr old, 2 yrs old, etc. It helps also to find out the over due debts so that proper actions can be taken for speedy recovery.

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