What is the journal entry to record when a company factors its receivables?
Since the company receives cash from the 3rd party collection company, the debit would be to cash. Additionally, there would be a debit to factor expense, which is calculated using the % of total receivables. There would be a credit to accounts receivable for the full amount transferred.
It is typical for the 3rd party collection company to hold back a portion of the cash until a later date, so that amount would be a plug would be a debit to factor receivable.
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