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Finance a la shmoop what are aging receivables and an allowance for doubtful accounts

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A lot of people don't realize this but that was the original title of Moby [Book title changes to Moby Dick]

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Dick yeah all right My aching receivables that's your

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balance sheet talking well wine is about the only thing that gets better with age [Wine poured into a glass]

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and even it has its limits there yeah aliens go ahead and pour yourself a

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glass all right when receivables a balance sheet item

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that lives right here get old they - generally speaking get bad note how much

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higher the probability of non collection called deadbeat-ism gets as the age of

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the receivables increases well generally speaking bills that are gonna get paid

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generally get paid fast or at least on time and those that don't have to be

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tracked well best guesses matter in accounting so coming to an actual

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predicted rational and reasonable number is a big deal and you can see that in [Man discussing receivables]

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this case the spread between the legally owed money and the amount likely to be

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collected is a pretty big spread well the decline hits the assets side of the

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balance sheet in the form of accounts receivable here being lower and [Accounts receivable column highlighted]

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eventually when a bad debt is finally recognized as a deadbeat bad debt never

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to be collected and is dead dead dead well then it simply gets written off on

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the income statement or well said another way it goes away as a sale that

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never happened so that's aging receivables in a nutshell and yeah this [Aging receives inside a nut]

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is the one time you don't need to respect the elderly [Man trips over elderly man and gives thumbs up]

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