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please Mikel
can you give me detail explanation on debt factoring and the accounting treatement
thank youYou won’t need it in the exam – if it comes up, you can almost certainly rely on the fact that the “sale” of the receivables is not in fact a sale. So reverse the entry which treated it as a “sale” and then record the receipt of the cash ( debit ) and create a long / short term liability.
The mechanics of recording a debt factoring transaction is Debit cash with the amount received, Credit accounts receivable with the total value of the debt “sold” / “factored”. The difference should be debited to finance charges.
But it is highly unlikely to appear on Tuesday
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