Aging Schedule

by Obaidullah Jan, ACA, CFA

Aging schedule is a table that shows a summarized breakup of accounts receivable into different time brackets. It is an important tool used in working capital management to project pattern of collections and estimate doubtful debts.

It is called aging schedule because it ranks accounts receivable according to their age i.e. into slabs such as not yet due, 30 days overdue, 60 days overdue, 90 days overdue, etc.


Example 1: The following exhibit is the aging schedule of SG Oil Tools' accounts receivable as at 30 December 20X3:

Age Amount Percentage
Not due 25,000,000 67.46%
0-30 days past due 5,000,000 13.49%
31-60 days past due 2,540,000 6.85%
61-90 days past due 1,520,000 4.10%
90+ days past due 3,000,000 8.09%

Calculation of provision for doubtful debts from aging schedule:

Aging schedule can be used to estimate allowance for doubtful debts. From past experience, a company can determine a relationship between actual bad debts written off and the age of the debts. For example, if on average 20% of the balance in 31-60 days bracket is ultimately written off as bad debts, the company can expect 20% of the current 31-60 days balance to turn out uncollectible. The company estimates this historical ratio of actual bad debts to the accounts receivable balance for each bracket and then weighs the current balances in each bracket at those percentages to find the expected doubtful debts.

Example 2: Based on past experience, SG Tools estimates that 5% of not yet due, 10% of 0-30 days past due, 15% of 31-60 days past due, 25% of 61-90 days past due and 80% of 90+ days past due accounts receivable turn out uncollectible.

Expected doubtful debts = 5% × $25,000,000 + 10% × $5,000,000 + 15% × $2,540,000 + 25% × $1,520,000 + 80% × $3,000,000 = $4,911,000

The allowance for doubtful debts should stand at $4,911,000.