# The AR aging report

> Northwind's year-end aging, built by due date and tied to the ledger, and the two numbers read off it: DSO for the trend, CEI for the collections effort.

Source: https://lopifi.com/learn/ar-aging-report-dso-cei
Part of: Lopifi — US GAAP books on autopilot, checked by a CPA (https://lopifi.com)

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**How do I read an AR aging report and calculate DSO and CEI?** Northwind's year-end aging, built by due date and tied to the ledger, and the two numbers read off it: DSO for the trend, CEI for the collections effort.

The [Aging](https://lopifi.com/md/glossary/aging) is the AR subledger read on one date, each open invoice placed by how many days it is past its **due** date. At December 31 Northwind has 4 open invoices worth $22,900, and 61% of it is past due.

| Invoice | Customer | Due | Days past due | Open |
| --- | --- | --- | --- | --- |
| INV-1002 | Kestrel Fitouts | October 31 | 61 | 2,400 |
| INV-1005 | Pinecrest Builders | November 11 | 50 | 6,000 |
| INV-1009 | Marlow Workshop | December 16 | 15 | 5,500 |
| INV-1010 | Ridgeway Supply | January 9 | Current | 9,000 |

Northwind's aging at December 31, 2026.

| Bucket | Open |
| --- | --- |
| Current | 9,000 |
| 1–30 | 5,500 |
| 31–60 | 6,000 |
| 61–90 | 2,400 |
| 91+ | 0 |
| Total | 22,900 |

By bucket. The total ties to account 1200 at $22,900.

*[Figure: ar aging]*

Northwind's December 31 aging, with its own loss rates feeding [the allowance](https://lopifi.com/md/learn/bad-debt-allowance-vs-direct-write-off).

**Exercise — Age Northwind's receivables at year end.** Northwind's open invoices at December 31, 2026. Put each one in its aging bucket by counting days past the **due** date, not the invoice date. Then check that the buckets add up to 22,900.00, the accounts receivable control account. Type it in the workbook at https://lopifi.com/playground.

**Wrong:** Days since the invoice was issued.

**Right:** Days past the due date, which the terms set.

Aging from the invoice date makes every Net 30 invoice look a month late on day 31. INV-1005 is 50 days past due, not 80.

In this lesson: the aging is the list. The two numbers read off it, DSO for the trend and CEI for the collections effort, are worked on the page below. The same buckets set the allowance in [the bad debt lesson](https://lopifi.com/md/learn/bad-debt-allowance-vs-direct-write-off).

> **Age by due date, tie the aging to the control account, then read DSO and CEI. A metric off an aging that doesn't tie is a guess.**

## Pages in this lesson

- [DSO and CEI, worked](https://lopifi.com/md/learn/ar-aging-report-dso-cei/dso-and-cei) — 6 min. How do I calculate DSO and the collection effectiveness index?

## Where this lesson's rules come from

- [Wikipedia, “Days sales outstanding”](https://en.wikipedia.org/wiki/Days_sales_outstanding) — Days sales outstanding (reference)
- [ASC 326-20-30-3](https://asc.fasb.org/326/tableOfContent) — An aging schedule is an accepted way to estimate the allowance (codification)

## Read further

- https://lopifi.com/md/calculators/dso
- https://lopifi.com/md/calculators/collection-effectiveness-index
- https://lopifi.com/md/calculators/receivables-turnover
- https://lopifi.com/md/differences/dso-vs-dpo
- https://lopifi.com/md/startups/ar-aging-and-collections
- https://lopifi.com/md/tools/terms
- https://lopifi.com/md/docs/domain/05-order-to-cash
- https://lopifi.com/md/docs/domain/10-metrics

- **Track:** [Accounts receivable](https://lopifi.com/md/learn/ar)
- **Lesson:** Lesson 7 of 9 — 8 min
- **Terms taught:** [Aging](https://lopifi.com/md/glossary/aging), [DSO](https://lopifi.com/md/glossary/dso), [CEI](https://lopifi.com/md/glossary/cei), [Receivables turnover](https://lopifi.com/md/glossary/receivables-turnover), [Control account](https://lopifi.com/md/glossary/control-account), [Subledger](https://lopifi.com/md/glossary/subledger)
- **Previous:** [Card payments and processor payouts, AR · Lesson 6](https://lopifi.com/md/learn/cash-application-explained/card-payments-and-processor-payouts)
- **Next:** [DSO and CEI, worked](https://lopifi.com/md/learn/ar-aging-report-dso-cei/dso-and-cei)
- **The course:** https://lopifi.com/md/learn