Answer:
This statement is true.
Explanation:
The aging method of estimating uncollectible accounts is a method that is used to calculate the amount of counts receivable of a company that may not be collected.
Under the aging method, invoices of customers that are yet to be paid are sorted by invoice date into about four columns, and invoices with longer days assumed to be less likely to be collected.
For example, a company may have current invoice not yet due in the first column with 25% not likely to be collected; the invoice amounts that are 1-30 days past due in the second column with 50% not likely to be collected; the invoice amounts that are 31-60 days past due in third column with 75% not likely to be collected; and the invoice amounts that are 61 and above days past due in the fourth column with 100% not likely to be collected.
Based on the explanation above, it is therefore true that the aging method of estimating uncollectible accounts is based on the assumption that the longer an account receivable remains outstanding, the less likely it is to be collected.
