Regularly reviewing an accounts receivable aging report can help management do which of the following?

• A. Calculate the company's total inventory turnover
• B. Estimate depreciation expense for fixed assets
• C. Determine the amount of cash on hand
• D. Identify overdue accounts and assess the likelihood of collection

Answer: (D)

Verified step by step guidance

1. Understand the purpose of an accounts receivable aging report: It categorizes outstanding receivables based on the length of time they have been unpaid, helping management monitor overdue accounts.
2. Recognize that the accounts receivable aging report is not related to inventory turnover, depreciation expense, or cash on hand. These are separate financial metrics and reports.
3. Focus on the primary use of the aging report: It helps management identify overdue accounts, which are receivables that have not been paid within the agreed-upon terms.
4. Assess the likelihood of collection: By reviewing the aging report, management can evaluate the probability of collecting overdue amounts based on the age of the receivables and the payment history of customers.
5. Use the information from the aging report to make informed decisions, such as following up with customers, adjusting credit policies, or writing off uncollectible accounts if necessary.