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anya12345 · Sep 7, 2010, 08:38 PM

If I am auditing a client's aged receivables balance and I come across aged credits, should I suggest that the receivables be adjusted on the trial balance and a liability be created?

For example, in thousands:
Current 31-45 46-60 61-90 90+
Customer A 309 125 (42)
Customer B 427 54 3
Customer C 325 215 (18)

This is for an example auditing case. I'm just not sure if I should address the aged credits.

anya12345 · Sep 7, 2010, 08:39 PM

Okay, it wouldn't let me spread those out but it's a typical aged receivables table.

morgaine300 · Sep 8, 2010, 04:06 AM

A liability represents something that the company owes to someone else or some obligation they have. If a customer's account (which they owe us) gets old, how does that make us now owe them?

You can write off stuff you don't think will ever be collected, but you better wait more than 90 days. But writing off an account is an expense.

You can also make an adjusting entry for what you think might not get paid (using an allowance account), but you need to learn how to do that -- not only would that require reading up on a chapter on bad debt to learn how, but would also require going back through your accounting records to decide what types of percentages should be used, etc.