LESSON

GRADE 12 69

DEBTORS’ AGE ANALYSIS

INTRODUCTION:
Any business must keep a careful control of all the accounts in the Debtors Ledger. The
debtor’s credit controller has the responsibility to monitor a debtor’s credit rating before
extending any credit to the debtor. The debtor’s clerk’s responsibility includes that no debtors
exceed their credit limit and that payments are regularly received according to their
agreement with them.
Before any order can be despatched to a debtor, the debtor’s clerk must first approve of the
credit sale. The debtor’s clerk must verify the balance of the debtor’s account and the agreed
credit limit allowed for that debtor.
Debtor’s Age analysis is used where the debtor’s ledger account is broken down into time
periods so that it is clear for how long an amount has been outstanding.
When calculating age analysis there are TWO RULES to apply: A credit note is subtracted from the
most recent invoice issued
because goods usually can be
❑ Returns are subtracted from the latest sale. returned within a certain number of
days, e.g. 7 days

❑ Payments are subtracted from the oldest outstanding balance.

A receipt will be issued for the

payment and for discount
allowed. This amount will be
subtracted from the oldest
REASONS FOR DEBTORS’ AGE ANALYSIS amount owing by the debtor
❑ To ensure that Debtors honour the agreement of e.g. 30 days.
❑ To charge interest on overdue balances according to the agreement.
❑ To take legal action if account is not settled within a certain period, e.g. more than
90 days.
❑ To minimise debts to be written off.
❑ To ensure liquidity in the business and a proper cash flow.
❑ To be aware of debtors who honour their credit agreement and those who do not.
❑ To be able to follow up on those debtors who signed a payment plan due to
previous late payments.
❑ To follow up on possible errors that could be on a debtor’s statement where the
debtor only paid the correct amount without letting the business know of the error.

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69 Accounting grade 12 CAPS
 EXAMPLE OF A DEBTOR’S STATEMENT AND AGE ANALYSIS
Study the following statement to understand the calculation of age analysis.
A possible format was used for the braking down of Moja and Sons account into time
periods, February to May. Take into account the two rules.
❑ Returns are subtracted from the most recent invoice
❑ Payments are subtracted from the oldest outstanding balance
KIMA WHOLESALERS NO. 77
Pretoria 1000
STATEMENT OF ACCOUNT
TO: Moja and Sons
Mahlangu Street
Timbato DATE: 31 May 2014
TERMS: CREDIT PERIOD: 30 days CREDIT LIMIT: R5 000
o 10% discount on settlement of account within 14 days of purchased
o Interest at 5% per month will be charged on amounts owing for 60 days or more
Date Description Debit Credit Balance
01-03-2014 Balance brought forward 800
07-03-2014 Invoice 102 2 500 3 300
28-03-2014 Receipt no 533 500 2 800
03-04-2014 Invoice 125 2 400 5 200
08-04-2014 Credit note C66 600 4 600
29-04-2014 Receipt 575 400 4 200
Current month
01-05-2014 Invoice 130 1 200 5 400
means the month Invoice
09-05-2014 of 131 700 6 100
the statement
30-05-2014 Receipt 621 1500 4 600
Receipt 621 (discount) 150 4 450
Current 30 Days 60 Days 90 Days 120 Days

Age Analysis: 1 900 1 800 800 0 0

Remember the rule: Subtract

The table below was used to payments from the longest
calculate the age analysis outstanding balance
Steps to follow to see how the Age analysis was calculated:
Transactions: May April March February Draw a template with months
Balance 800
Invoices 1 200 2 400 2 500 Record the invoices according to the
+ 700 month that you have received the stock

Returns (600) Remember the rule! Returns are subtracted

Total purchases from the latest invoice received before the
per month 1 900 1 800 2 500 800 returns.
Receipts and The payment of R500 (March) must pay off the
discounts balance of R800. (800 – 500 = 300 still
Mar: payment by - - - (500) outstanding)So R300 will come off from the next
debtor R500 payment.
- (100) (300) The R400 (April) receipt must 1st pay off the
Apr: payment by R300 in Feb (400-300 = R100) The R100
debtor R400 paid some of the debt of March
- - - The R1500 and discount R150 (May), paid off
May: R1500 +150 (1 650) some of the debt of March

Balance 1 900 1 800 750 0

Check your answer: 1 900 + 1 800 + 750 = R4 450
Take note: The total of the analysis must be equal to the total balance on the statement and debtor’s
ledger account.
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 EXAMPLE OF AGE ANALYSIS OF ALL THE DEBTORS IN THE BUSINESS

Study the following summary of all the debtors’ balances in the business. Verify which
debtors are honouring their agreement with the KIMA Wholesalers and to take steps
according to the agreed credit terms.
AGE ANALYSIS OF ALL DEBTORS
7% interest must be
charged
KIMA WHOLESALERS 800 x 7%= R56

Summary of Debtors’ balances on 30 May 2014 7 % interest must be

Current 30 Days 60 Days 90 Days >90 Days charged
Age Analysis 350 x 7%= R24,50
Modja and sons 1 900 1 800 800 0 0
On the Beach Store 1 000 0 2 500 0 0
Cloud Sun 2 000 500 0 0 0 Account
C de Moon 650 0 300 50 0 to be
R Rain 400 0 0 0 400
handover
to
W Weatherby 2 000 0 0 0 0
attorneys

7 950 2 300 3 600 50 400

Total amount owed
by debtors. This 5 % discount can
amount must be calculated if
correspond with the paid within 30 days
2 000 x 5% = R100
balance of the 2 000 – 100=
Example
Debtors of Terms
Control account to debtors: R1 900
1. 5% Discount on payment within 30 days
2. 7% Interest charged if not paid within 60 days
3. Account to be handover to attorneys for collection after 90 days.

INTERNAL CONTROL:
The sooner a business acts on recovering an outstanding amount, the better the chance
of recovering the money.
The business should negotiate a payment plan and not simply write the debt off as
irrecoverable.
The reason for the debtor’s delay in payment must be investigated and debtors should
provide a plan of action to resolve the payment of account.
An immediate payment must be requested according to the agreed payment plan and the
repayment of the rest of the debt must be put in place.

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PROCEDURE FOR DEBTORS’ AGE ANALYSIS

1 OPENING BALANCE
If the information provided is from the month of May, then start your calculation with the
closing balance in April in order to determine the age of the debt correctly.

2 DEBITS
The total debits must be recorded in the respective columns.
Total debits for a particular month include the following:
- total credit sales for the month
- interest charged for the particular month – must be recorded in the month that it is
charged to the account
- cancellation of cheques during a particular month
- cancellation of discount during a particular month
- any other debits to the debtor during a particular month

3 PAYMENTS
Record each transaction in the particular month separately.
- The oldest invoices are paid first
- The more recent invoices are paid progressively
- Payments can include discounts OR discounts can be separated

4 RETURNS
Show the returns and allowances in the month in which the return or allowance was made
and not in the month in which the sale was made.

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69 Accounting grade 12 CAPS
Example - Debtors age analysis

Learners to do this example with the educator

The following information of two debtors was taken from the books of Casper Traders. Note
that Casper Traders has a credit terms policy of 30 days.

REQUIRED
1 Complete the Debtors’ age analysis statement for each debtor.
2 Complete the composite age analysis for both debtors.
3 What conclusion can you make when looking at the percentage of outstanding
debtors?
4 Comment by giving reasons for the ineffectiveness of the credit terms policy of
Casper Traders.
5 Make recommendations for improving the debtors’ collection period.

INFORMATION

Transactions with Anne Way from 01 February 2009 to 31 July 2009

Date Description Debit Credit Balance
01 / 02 / 08 Balance 4 800 4 800
08 / 02 / 08 Sales 7 200 12 000
01 / 03 / 08 Payment received 10 000 2000
18 / 03 / 08 Sales 8 400 10 400
22 / 03 / 08 Sales 24 800 35 200
31 / 03 / 08 Payment received 19 400 15 800
06 / 04 / 08 Sales 13 400 29 200
28 / 04 / 08 Payment received 12 000 17 200
13 / 05 / 08 Sales 15 600 32 800
25 / 05 / 08 Sales 7 000 39 800
29 / 05 / 08 Payment received 17 000 22 800
04 / 06 / 08 Sales 18 800 41 600
10 / 06 / 08 Sales 4 600 46 200
19 / 07 / 08 Sales 9 200 55 400

Transactions with Keletso Moloi from 01 May to 31 July 2008

Date Transactions Amount
01 / 05 / 08 Outstanding balance 5 400
05 / 05 / 08 Issued receipt no. 749 for payment received 3 000
Discount allowed 150
15 / 05 / 08 Issued inv. no. 7691 for goods sold on credit 4 800
25 / 05 / 08 Issued credit note no. 518 for goods returned 600
06 / 06 / 08 Credit sales as per inv no. 7723 6 300
30 / 06 / 08 Interest charged on overdue account 150
10 / 07 / 08 Issued receipt no. 807 for payment received 4 500
26 / 07 / 08 Sold goods as per inv. no. 7779 5 700
31 / 07 / 08 Interest charged on overdue account 180

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 ANSWER

Anne Way
Date / Receipts/ Amount Closing Months
Month Discounts/ Balance Feb Mar Apr May June July
Returns/Sales January
Feb Balance 4800

Mar

Apr

May

Jun
Jul

Keletso Moloi
Date / Receipts/ Closing Months
Month Discounts/ Amount Balance May June July
Returns / sales April
May Balance 5400

Jun

Jul

2 Composite Debtors’ Age Analysis

Overdue
Name Balance Current 30 days
60 days 90 days
Anne Way
Keletso Moloi
Total
Percentage

3 What conclusion can you draw when looking at the percentage of outstanding debtors?

.4 Comment by giving reasons for the ineffectiveness of the credit terms policy

5 Make recommendations for the improving the debtors’ collection period

➢
➢
➢
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69 Accounting grade 12 CAPS
 ACTIVITY 10

INSTRUCTION

Use the figures in the following debtors statement account in the books of Samual Traders
to calculate the age analysis.

R VISAGIE
Date Details Fol Debit Credit Balance
Feb 1 Balance 3 400
10 Receipt 410 CRJ 1 800 1 600
25 Invoice 281 DJ 1 500 3 100
Mar 15 Invoice 312 DJ 840 3 940
18 Credit note 86 DAJ 120 3 820
21 Receipt 434 CRJ 1 900 1 920
Apr 15 Invoice 335 DJ 1 200 3 120
28 Invoice 348 DJ 560 3 680
May 21 Invoice 370 DJ 600 4 280
29 Journal voucher 102 (interest) GJ ? ?
90 days 60 days 30 days Current Balance
? ? ? ? ?
Terms: 30 days 2% interest charged for 90 days and
more

ANSWER SHEET

2.1 R VISAGIE
Date / Receipts/ Amount Closing Total Debits [Credit sales and other debits]
Month Discounts/ Balance Feb Mar Apr May June July
Returns January
[Credits]

2.2 Composite Debtors’ Age Analysis

Overdue
Name Balance Current 30 days
60 days 90 days
R Visagie

Percentage

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 ACTIVITY 11

INFORMATION:

The following information of two debtors was taken from the books of Bakwar & Warbak
partners. Answer the question after completing the debtors’ age analysis statement.

Name of Balance Current 1 month 2 Months 3 Months More than

debtor amount 3 months
L Ngwenya

B JayZee

Total

% of Total

Transactions with L Ngwenya from 01 February 2008 to 31 July 2008

Date Description Debit Credit Balance

01/02/08 Balance 3 400
28/02/06 Sales 1 600 5 000
11/03/06 Payment received 5 000 0
15/03/06 Sales 6 200 6 200
20/03/06 Sales 2 400 8 600
31/03/06 Payment received 5 000 3 600
06/04/06 Sales 3 700 7 300
30/04/06 Payment received 2 000 5 300
11/05/06 Sales 7 900 13 200
27/05/06 Payment received 6 000 7 200
05/06/06 Sales 2 900 10 100
12/06/06 Sales 3 300 13 400
29/06/06 Payment received 7 400 6 000
10/07/06 Sales 8 600 14 600

Transactions with B JayZee from 01 February 2008 to 31 July 2008

Date Description Debit Credit Balance

01/02/08 Balance 2 400
08/02/06 Sales 3 600 6 000
01/03/06 Payment received 5 000 1 000
18/03/06 Sales 4 200 5 200
22/03/06 Sales 12 400 17 600
31/03/06 Payment received 9 700 7 900
06/04/06 Sales 6 700 14 600
28/04/06 Payment received 12 000 2 600
13/05/06 Sales 7 800 10 400
25/05/06 Sales 3 500 13 900
29/05/06 Payment received 12 000 1 900
04/06/06 Sales 9 400 11 300
10/06/06 Sales 2 300 13 600
19/07/06 Sales 4 600 18 200

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 REQUIRED:

1. Use the information and complete the debtor age analysis by using the
following format. (24)

2. What conclusion can you make when looking at the percentage of

outstanding debtors? (2)

3. Do you think that the credit arrangement policy of Bakwar & Warbak
partners is effective? Explain. (6)

4. You have been asked to give advice to Bakwar & Warbak partners how
they could handle the two accounts. What will be your recommendation? (6)

ANSWER

Name of Balance Current 1 month 2 Months 3 Months More

debtor amount than 3
months
L Ngwenya
B JayZee
Total
% of Total
(1 mark each 24)

2. What conclusion can you make when looking at the percentage of

outstanding debtors?

(2)
3. Do you think that the credit arrangement policy of Bakwar &
Warbak partners is effective? Explain.

(6)

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4. You have been asked to give advice to Bakwar & Warbak partners
how they could handle the two accounts. What will be your
recommendation?

(2x3=6)

Make use of activities in the prescribed text books as class work or homework
New Era Oxford Study Master Top Class
11,13; 11,14; 11,15; 11,16 Unit 3: Act 1, 2 11,8; 11,9; 11,10 2,61; 2,62

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 LESSON
ANSWERS
69

Example

Anne Way
Date / Receipts/ Amount Closing Months
Month Discounts/ Balance Feb Mar Apr May June July
Returns/Sales January
Feb Balance 4800
Sales 7200 7200
Mar Sales 33200
Payments 29400 (4800) (7200) (17400)
Apr Sales 13400 13400
Payment 12000 (12000)
May Sales 22600 22600
Payments 17000 (3800) (13200)
Jun Sales 23400 23400
Jul Sales 9200 9200
Nil Nil Nil 200 22600 23400 9200
90days 60days 30days Current

Keletso Moloi
Date / Receipts/ Closing Months
Month Discounts/ Amount Balance May June July
Returns / sales April
May Balance 5400
Payments 3150 (3150)
Sales 4800 4800
Credit note 600 (600)
Jun Sales 6300 6300
Interest 150 150
Jul Payment 4500 (2250) (2250)
Sales 5700 5700
Interest 180 180
0 1950 6450 5880
60day 30day Current

2 Composite Debtors’ Age Analysis

Overdue
Name Balance Current 30 days
60 days 90 days
Anne Way 55 400 9 200 23 400 22600 200
Keletso Moloi 14 280 5 880 6 450 1 950 0
Total 69 680 15 080 29 850 24 550 200
Percentage 100 21,64% 42,84% 35,23% 0,29%

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3 What conclusion can you draw when looking at the percentage of outstanding debtors?
Debtors are not strictly adhering to the credit terms policy of the business.
Approximately 36% of debtors are overdue with their accounts.

.4 Comment by giving reasons for the ineffectiveness of the credit terms policy
Although interest is being charged, not all debtors are compelled to pay interest on their overdue accounts.
It is clear that the credit terms policy is not being enforced.

5 Make recommendations for the improving the debtors’ collection period

➢ Send out written reminders.
➢ Follow up with written reminders.
➢ Do not supply goods unless the account is paid up to date.

ACTIVITY 10

2.1 R VISAGIE
Date / Receipts/ Amount Closing Total Debits [
Month Discounts/ Balance Credit sales and other debits]
Returns January
[Credits]
Feb Mar Apr May
Closing
balance and 3 400 1 524 840 1 760 600
credits
Feb Payments 1 800 (1 800)
Mar Payments 1 900 (1 600) (300)
Credit note 120 (120)
0 1 224 720 1 760 600

2.2 Composite Debtors’ Age Analysis

Overdue
Name Balance Current 30 days
60 days 90 days
R Visagie 4 304 600 1 760 720 1 224

Percentage 100% 13,9% 40,9% 16,7% 28,5%

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 ACTIVITY 11

1.

Name of Balance Current 1 month 2 Months 3 Months More

debtor amount than 3
months
L Ngwenya 14 600 8 600 0 700 1 700 3 600

B JayZee 18 200 4 600 11 700 0 0 1 900

Total 32 800 13 200 11 700 700 1 700 5 500

% of Total 100% 40.2% 35.7 2.1% 5.2% 16.8

(1 mark each 24)

2. What conclusion can you make when looking at the percentage of

outstanding debtors?
The outstanding amounts for 2 and 3 months are not a problem but the
two customers do not pay with in the 30 days. (2)

3. Do you think that the credit arrangement policy of Bakwar &

Warbak partners is effective? Explain.
The 16.8 % outstanding debts for more than 3 months is a big concern to
the business. Also the 35.7 % outstanding debts that are more than 30
days outstanding must be a concern to the business. Bad debt is a
possibility. The business should however improve their collection and
credit policies. (6)

4. You have been asked to give advice to Bakwar & Warbak partners
how they could handle the two accounts. What will be your
recommendation?
o Charge interest on the overdue account
o Offer discount for early settlement
o Cut off credit if the account is overdue
o Send out reminders and letters
o Phone the debtor
Any other relevant possible answers e.g. (Take note of the new National
Credit Act.) (2x3=6)

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