Answer (D) is correct . The purpose of an aging of receivables is to classify receivables by due date. Those that are current (not past due) are listed in one column, those less than 30 days past due in another column, etc. The amount in each category can then be multiplied by an estimated bad debt percentage that is based on a company’s credit experience and other factors. The theory is that the oldest receivables are the least likely to be collectible. Aging the receivables and estimating the uncollectible amounts is one method of arriving at the appropriate balance sheet valuation of the accounts receivable account.
Answer (A) is incorrect because An aging schedule is used for receivables, not liabilities.
Answer (B) is incorrect because An aging schedule concerns specific accounts, not averages.
Answer (C) is incorrect because An aging schedule focuses on uncollected receivables.
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