If the firm wants to identify the percentage of accounts receivable that are over 90 days old, the firm should prepare ________________.
A) A detailed analysis of accounts receivable
B) An aging schedule
C) A credit analysis
D) An analysis of the cash cycle

Question

Quizplus · Accepted Answer

An aging schedule is a report that groups a company's accounts receivable by the length of time an invoice has been outstanding. This schedule provides information on the percentage of accounts receivable that are over a certain number of days old, typically 30, 60, or 90 days. Therefore, preparing an aging schedule is the best way for the firm to identify the percentage of accounts receivable that are over 90 days old. Option A is too general and does not specifically identify the age of the accounts receivable. Option C relates to assessing the creditworthiness of customers, which is not directly relevant to identifying the age of accounts receivable. Option D measures the time it takes for the company to convert inventory into cash, which is not directly relevant to identifying the age of accounts receivable.

If the Firm Wants to Identify the Percentage of Accounts