Accounts receivable is listed as a current asset in the balance sheet, since it is usually convertible into cash in less than one year as it is the amount owed by the customer to the seller.

Accounts receivable is the amount to be received by the seller from the customer. Hence, it comes under asset.

Accounts-receivable financing is a type of asset-financing arrangement in which a company uses its receivables — outstanding invoices or money owed by customers — to receive financing.

when a business sells its AR (accounts receivable) to a factoring company and receives short-term business funding in return, this is what called as Accounts Receivable Financing.

How it works ::

Business-to-business sales are often offered with payment terms of 30, 60 or 90 days.

The buyer receives the product, but doesn't submit payment until the mutually agreed-upon date.

The seller records the sale as revenues and increases the accounts receivable by the amount of the sale.

When the payment arrives, the seller decreases the accounts receivable and increases cash.

Accounts receivable financing allows the seller to get the cash immediately by selling the receivable to a third party. This is called factoring.

 Accounts receivables help small businesses by providing quick-time period liquidity. Additionally continued sales on credit provide the  much-needed continuity for small companies.

Accountants... in big organization there will be a department to maintain AR department.

An accounts receivable aging is a report that lists unpaid customer invoices and unused credit memos by date ranges. A typical aging report lists invoices in 30-day "buckets," where the left-most column contains all invoices that are 30 days old or less, the next column contains invoices that are 31-60 days old, the next column contains invoices that are 61-90 days old, and the final column contains all older invoices. The report is sorted by customer name, with all invoices for each customer itemized directly below the customer name, usually sorted by either invoice number or invoice date. A sample report follows, though without the individual invoice detail that is usually found in such a report:

Customer Name 

Total A/R 0-30

Days 31-60

Days 61-90

Days 90+

Days

Abercrombie $15,000 $10,000 $5,000 

Bufford Inc. 29,000 20,000 9,000 

Chesterton Co. 83,000 47,000 21,000 12,000 3,000

Denver Brothers 8,000 8,000

Totals $135,000 $57,000 $46,000 $21,000 $11,000

If the report is generated by an accounting software system (which is usually the case), then you can usually reconfigure the report for different date ranges. For example, if your payment terms are net 15 days, then the date range in the left-most column should only be for the first 15 days. This drops 16-day old invoices into the second column, which highlights that they are now overdue for payment.

The report primarily contains invoices, but it may also contain credit memos that have not been used by customers, or which have not yet been matched against an unpaid invoice.

The aging report is the primary tool used by collections personnel to determine which invoices are overdue for payment, and which therefore require them to contact customers. Given its use as a collection tool, the report may be configured to also contain contact information for each customer.

The aging report is also used as a tool for estimating potential bad debts, which are then used to revise the allowance for doubtful accounts. The usual method for doing so is to derive the historical percentage of invoice dollar amounts in each date range that usually become a bad debt, and apply these percentages to the column totals in the most recent aging report.

An additional use of the aging report is by the credit department, which can view the current payment status of any outstanding invoices to see if customer credit limits should be changed. This is not an ideal use of the report, since the credit department should also review invoices that have already been paid in the recent past. Nonetheless, the report does give a good indication of the near-term financial situation of customers.

Trade receivables are amounts billed by a business to its customers when it delivers goods or services to them in the ordinary course of business. These billings are typically documented on formal invoices, which are summarized in an accounts receivable aging report. In the general ledger, trade receivables are recorded in a separate accounts receivable account, and are classified as current assets on the balance sheet if you expect to receive payment from customers within one year.

To record a trade receivable, the accounting software creates a debit to the accounts receivable account and a credit to the sales account when you complete an invoice. When the customer eventually pays the invoice, the accounting software records the cash receipt transaction with a debit to the cash account and a credit to the accounts receivable account.

Trade receivables vary from non trade receivables in that non trade receivables are for amounts owed to the company that fall outside of the normal course of business, such as employee advances or insurance reimbursements. Also, most or all of the transactions passing through the main accounts receivable account are generated by the accounting system, as you create customer invoices and credit memos, whereas the transactions recording non trade receivables nearly always involve journal entries.