Accounts Receivable and Factoring Transformation

Topics: Accounts receivable, Factoring, Generally Accepted Accounting Principles Pages: 2 (451 words) Published: January 18, 2011
‘Factoring – Transformation from nascent stage to growing stage in India By Chandrima Das’
INC Faculty – Nagpur

Abstract :- A brief concept of factoring . Its Start up time , Its advantages and disadvantages .The reason for factoring gaining its importance day by day . Nascent stage of factoring in India ,but slowly increasing its edge and importance .How the increasing competitive mindset helping factoring to spread its arm in the banking sector .A study on who are the players in factoring market in India ,how do they function .The upcoming trend of factoring in India .Different challenges faced by different factors coming into factoring business.

Introduction :

According to a common man the word factoring may mean in different ways . According to the language of math – HCF or LCM or the factors which makes a number well defined is known as factor . Ex 12 = 3*4 or 6*2 or 12* 1 where 1,3,4,6,12 are said to be factors of 12 .

According to physics/chemistry/biology – we studied different factors involved in making a theory true .
So definition of factor differs with subjects .In language of finance –factoring is the process of sale of accounts receivable to factor (buyer) by the seller (company).The financial intermediary carrying on the process is known as Factor .

Detailed Study :

What is accounts receivables?
It is the amount which a customer owe to the company from where he have purchased some goods . During journal entry company debits accounts receivable and credit revenue account ,but when the customers pays the amount in cash then cash account is debited and receivable account is credited .

Why account receivable is an important part to handle with ?
Company generally give credit to customers for payment in order to increase sales .If customers pays in time then the company tries to provide more and more services to that customers . But if any customers donot make payment even after the end of credit period then this is a...
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