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How is the age of accounts payable calculated?

How is the age of accounts payable calculated?

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Age of Accounts Payable: This is the measurement of number of days taken by the company to pay its creditors. This is also termed as Days Payable Outstanding and is used for ageing analysis of the Accounts Payable. It is important to regularly monitor the ageing of accounts payable to ensure the effective disbursement of cash / working capital management as well as cautious about long over dues, which might trigger legal issues.

Formula for calculating the Age of Accounts Payable is (Accounts Payable / Cost of Goods Sold) * No. of days in a year.

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