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Unformatted text preview: ) Sales of Receivables ((FACTORING) FACTORING) Sales Sales (FACTORING) Factors are finance companies or banks that buy receivables from businesses for a fee (A tougher concept to grasp). Illustration 7-16 Chapter 7-58 LO 8 Explain accounting issues related to disposition LO of accounts and notes receivable. of Sales of Receivables (FACTORING) Sales of Receivables ((FACTORING) FACTORING) Sales Sales (FACTORING) Sale Without Recourse – CAN’T go back to seller Purchaser (or FACTOR) assumes collection risk Transfer is an “outright sale” of receivables Seller records loss on sale Purchaser holds back funds and seller records “Due from Factor” receivable account for any discounts/R&As/W/Os Sale With Recourse – CAN go back to seller Seller maintains collection risk Seller “guarantees” payment to purchaser “Financial components approach” used to record transfer Chapter 7-59 LO 8 Explain accounting issues related to disposition LO of accounts and notes receivable. of Sales of Receivables (FACTORING) Sales of Receivables ((FACTORING) FACTORING) Sale...
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This note was uploaded on 01/29/2013 for the course ACC 223 taught by Professor Staff during the Fall '12 term at Niagara University.

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