What is the accounting process for handling unpaid Accounts Receivable?
When a business sells goods or services on credit, it is imperative that they create and maintain a system by which they can track the amount that is owed and who owes it. An accounts receivable aging report is a tool used to keep track of how long each debt has been in the ledger and to alert accounts receivable agents when further action is needed to collect the debt. When a balance has been unpaid for three months (90 days), it is considered delinquent. Once the collections department has been unsuccessful in collecting the debt, the amount of the debt must be removed from the accounting ledgers. The first step is to apply a credit to the individual account receivable account. This credit will not appear as a payment, but rather as a bad debt credit. This amount, totaled with other bad debts, is then applied to the accounts receivable control account as a debit. This will adjust the total accounts receivable and will also change the accounts receivable line item on the businesss bal
