Open-Item Versus Balance-Forward Accounting

If you practice open-item accounting, you match payments against bills. The term "open-item accounting" is used to describe this accounting practice because:

• Payments are matched against "open items" (i.e., unpaid bills and adjustments)

• Only unmatched bills and adjustments (i.e., open items) affect aged debt.

Contrast open-item accounting with "balance-forward" accounting - in a balance-forward world, payments are not matched to bills. Rather, payments implicitly relieve a taxpayer's oldest debt.