222

$show=home

Founder of Accounting Education

Online Accounting Course 

Achieve one of the highest distinctions in the accounting management profession: Become a Online Accountant. As an Online Accountant, you will have the knowledge and the skills to thrive in the competitive accounting industry.

The Online Accounting course gives you expertise and real-world skills in accounting analysis. Join more than 100,000 professionals who have been recognized globally for their commitment to ethics and professionalism.











$show=home

Welcome to Accounting Education

The Accounting University with 3400+ Accounting contents as study material which can watch, read and learn anyone, anywhere.

Start your studies

$show=home

Latest $type=blogging$count=10$author=hide$comment=hide$label=hide$show=home$date=hide

Accounting Treatment of Factoring Receivables

In this world, if you have the asset, it can be sold. Yesterday, my sold sofaset through OLX in his city. If you are selling your products to your customers on credit, then you have to take money from your customer. So, this amount is your asset and you can sell it on discount to debt collection company. As per accounting, it is called factoring of account receivables.


There are two main reasons of factoring. First, you need not wait your money from debtors. For example, you have contract of two months, it means, your customer will pay within two months. But when you sell your debtor to other company, you will get all money in advance by deducting some discount. Second, there is not any risk of default. Factoring company, will not pay you all in advance, it will give your 80% or 90% of your total given debt. It will also deduct fees. So, due to two reasons, businessmen sell account receivables asset.

Now, when will enter in the contract of factoring, we have to do its accounting treatment. Here, we will teach, how can you do the accounting treatment of factoring transaction.



1st Step : Pass the Journal Entry of Selling of Account Receivables


When you sell your account receivables, cash will come in your pocket. You have to give the fees to debt collection company. This is your loss. So, every loss will be debit. To whom we sell the account receivable will not pay us whole the amount of account receivable. So, we have to take balance which we will get when customer will pay to debt collection company

For example, we sell Rs. 1,00,000's account receivable to discounting company and discounting company will pay its 90% on the basis of its estimation. Discounting company will also get 5% fees. Its journal entry will be

Cash/Bank Account Debit 90,000

Amount Receivable from Discounting Company Account Debit 5000

Loss on Sale through Factoring Debit 5000

Account Receivable Account Credit 1,00,000

2nd Step (A) : Pass the Journal Entry When Discounting or Factoring Company Receives money from our Customers




At that time, we have received some amount which is receivable from discounting or factoring company. So, we will pass this entry for recording this.In above example, we have to receive Rs. 5000 from discounting company which is just 5% of total debt.

Cash / Bank Account Debit 5000

Amount Receivable from Discounting company Account Credit 5000

Or 

2nd Step (B) : Pass the Journal Entry When Discounting or Factoring Company does not receive money from our Customers




When factoring or discounting company does not receive the money from our debtors, at that time, it will not pay our pending amount which is due from factoring company. So, it is also our loss. At that time, step 2nd's (A) entry will not pass but 2nd step (B) entry will pass for recording this loss.

Loss on Sale of Account Receivable Debit 5000

Amount Receivable from Discounting Company Account Credit 5000


Related Resources 

» How to Treat Preliminary Expenses
»  How to Treat Normal and Abnormal Loss
» How to Treat Foreign Exchange Rate Difference

COMMENTS

$hide=home

Name

access,2,account,87,accountant,93,Accounting,681,accounting definitions,99,accounting ebook,3,Accounting education,85,accounting procedure,2,accounting process outsourcing,2,Accounting Software,54,advance,3,advertising,6,africa,7,Amalgamation,6,amendments,16,announcements,62,Annuity,2,assets,52,audit,46,auditing,41,Australia,2,B.Com.,22,balance sheet,84,bank,111,Bank reconciliation,12,banking,33,basic accounting,110,BBA,1,benefits,13,best,50,bill,12,black money,3,blog,12,bloggers,7,book keeping,4,bookkeeping,2,Branch Accounting - full tutorial,8,budget,35,Budget variance,13,business,65,businessman,9,CA,30,calculator,4,canada,3,capital,72,capital budgeting,27,career,20,cash,40,cash book,8,cash flow statement,11,Chiense,1,children,13,china,6,class,3,coaching,2,coins,2,college,6,commerce,10,commerce students,7,company,36,computer,9,computer accounting,1,conference,4,Contact vinod kumar,1,Control Your Spending,27,corporate accounting,69,cost,160,cost accounting,195,cost center,8,cost centre,1,CPA,2,credit,18,credit card,11,cs,10,currency,35,data,11,Debit and credit,17,debit cards,1,debt,62,debtor,21,degree,6,depletion,2,depreciation,38,Diwali Messages,12,documents,4,dollar,5,domain,3,Downloads,3,Dubai,1,e-accounting,17,earning,17,education,247,Education Loans,6,email,15,employee,4,EPF,2,ERP,7,euromoney,1,examination,7,excel,17,excise duty,6,expenses,65,facebook,7,factor of loan,1,fans,2,feature,32,fifo,5,FII,4,fiji,1,finacle,1,finance,823,Finance Journal Entries,4,Financial,134,financial accounting,144,Financial Statements,1,fire insurance,3,flickr,2,flow,4,forensic,4,forex,21,formula,8,france,1,fraud,6,free,2,fun,34,function,1,fund,48,GAAP,36,GDP,1,gdr,5,germany,1,gold,7,goodwill,4,goodwill accounting,3,google,34,google apps,3,google apps,1,google base,1,google buzz,1,google calendar,1,Google docs,38,google finance,3,google fusion tables,1,google talk,5,govt.,5,GST,33,guide,85,health,6,Hindi,2,Hindi Language,3,history,3,holding company,3,How to treat FBT in Tally 9,1,HRA,3,ICAI,11,ICAWI,3,ICICI Bank,1,IFRS,10,income,17,income statement,17,Income Tax,7,India,57,indian railway,1,Indonesia,1,inflation,4,inflation accounting,3,infographics,8,information,7,inspiration,176,insurance,14,insurance accounting,2,Intangible,3,interest,26,international,7,Internet,41,Introduction of Tally 9,1,inventory,41,investment,135,investment in Shares,6,invoice,3,IT,1,Japan,1,Job costing,4,journal entries,139,Journal Entries eBook Help,4,Kalculate,1,keyboard,3,kuwait,2,laptop,2,law,4,LBT,1,learning,36,lease,5,lecture,11,ledger,15,leducation,1,Leverage Analysis,7,liabilities,16,lifo,3,linkedin,1,loan,74,logical point,1,loss,5,loss of profit,1,M.Com.,5,m.phil,2,malaysia,3,management accounting,129,manual accounting,4,manufacturing account,1,market,11,marketing,3,mastercard,2,material,13,MBA,14,MCA,1,media,4,migration,2,mobile,9,money,61,ms word,3,ms. excel,14,multi currency in tally 9,1,Multicurrency Accounting,3,mutual fund,30,national security,1,new and sacrifice ratio,1,new york times,1,new zealand,1,news,1,NGO,5,nonprofit-accounting,6,North Georgia Mountains,1,Notification,1,NPV,17,NSE,1,odbc,2,office,10,oman,1,online application,2,online accounting,11,Online Accounting Course,5,otcei,1,pakistan,3,parents,3,Partnership,1,pay pal,3,pdf,4,Personal Finance,6,pie chart,1,pie chart of income,2,pnb,5,podcast,1,ppf,1,presentation,10,price,7,privacy policy,2,prof. vinod kumar,13,profit,24,profit and loss account,12,project management,11,provision,13,purchase,9,puzzles,2,quickbooks,2,Quote,22,quotes,42,quotes of svtuition,1,rating agency,2,ratio analysis,34,RBI,7,readers,13,real estate,13,rectification of errors,11,remote control,2,reports,10,reserves,8,responsibility accounting,4,retirement,2,revenue,3,Revenue reserves,2,review,7,risk,11,rupees,9,salary,5,sale,12,saudi arabia,1,saving,19,sbi,9,scholarship,2,school,1,SEBI,13,security,30,service tax,23,share,20,share trading,15,Shares,16,shri lanka,3,singapore,2,sms,6,social accounting,7,society,5,solution,217,South Africa,1,stock,24,stock exchange,22,structure,6,student,39,students,70,study,21,subsidiary company,2,svtuition,14,swiss bank,2,tally,99,tally 9,8,Tally 7.2,8,Tally 9,42,Tally.ERP 9,59,tanzania,2,tax,94,Tax Accounting,30,TDS,15,teacher,62,teaching,112,technology,33,test,40,testimonial,15,testimonials,15,thailand,1,tips,60,trading,5,trading on equity,2,transaction,7,trend,12,trial balance,14,truthfulness,1,tuition,3,twitter,10,UAE,5,UGC - NET Commerce,13,UK,11,United Arab Emirates,1,university,9,usa,25,valuation,8,VAT,22,Video,35,Voucher and vouching,4,Wealth,8,wikipedia,25,working capital,29,youtube,14,
ltr
item
Accounting Education: Accounting Treatment of Factoring Receivables
Accounting Treatment of Factoring Receivables
http://3.bp.blogspot.com/-aCCx9pI4WdA/U223MrIwMNI/AAAAAAAANl0/FBj9GhIwx2M/s1600/factoring+means.PNG
http://3.bp.blogspot.com/-aCCx9pI4WdA/U223MrIwMNI/AAAAAAAANl0/FBj9GhIwx2M/s72-c/factoring+means.PNG
Accounting Education
https://www.svtuition.org/2014/05/accounting-treatment-of-factoring.html
https://www.svtuition.org/
https://www.svtuition.org/
https://www.svtuition.org/2014/05/accounting-treatment-of-factoring.html
true
2410664366776677676
UTF-8
Loaded All Posts Not found any posts VIEW ALL Reply Cancel reply Delete By Home PAGES Contents View All RELATED CONTENTS FOR YOUR LEARNING Topic ARCHIVE SEARCH ALL POSTS Not found any post match with your request Back Home Sunday Monday Tuesday Wednesday Thursday Friday Saturday Sun Mon Tue Wed Thu Fri Sat January February March April May June July August September October November December Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec just now 1 minute ago $$1$$ minutes ago 1 hour ago $$1$$ hours ago Yesterday $$1$$ days ago $$1$$ weeks ago more than 5 weeks ago Followers Follow THIS PREMIUM CONTENT IS LOCKED STEP 1: Share to a social network STEP 2: Click the link on your social network Copy All Code Select All Code All codes were copied to your clipboard Can not copy the codes / texts, please press [CTRL]+[C] (or CMD+C with Mac) to copy