Factoring generally refers to the economic activity of purchasing creditor's rights from others at a lower price and making profits by recovering the creditor's rights. For factoring business, it is generally carried out through short-term borrowings and accounts receivable accounts. How to handle the accounting?

How to do accounting for factoring business?

When transferring

Debit: bank deposit (according to the actual amount received)

Financial expenses (according to the handling fee paid when handling factoring business)

Loan: short-term borrowing

If the goods sold by the enterprise are returned, then:

Borrow: main business income

Finance Fees

Taxes payable - value-added tax payable (output tax)

Credit: Accounts receivable

When due, if the buyer can If the payment is fully paid, then

Borrow: short-term loan

Credit: accounts receivable

If the bank cannot collect the payment when it is due, because the bank has a demand If the company claims rights, the enterprise is obliged to repay the corresponding expenses

Borrow: short-term borrowing

Loan: bank deposit

What are short-term borrowings and accounts receivable? ?

Short-term loans refer to various loans borrowed by enterprises from banks or other financial institutions with a repayment period within one year based on the needs of production and operations, including production turnover loans, temporary loans, etc.

Accounts receivable refers to the amount of money that an enterprise should collect from the purchasing unit for selling goods, products, providing labor services and other services in the normal course of business, including the amount that should be borne by the purchasing unit or the unit that receives labor services. Taxes, packaging fees, various shipping charges, etc. paid in advance on behalf of the buyer. In addition, in the case of sales discounts, factors such as commercial discounts and cash discounts should also be considered

Accounts receivable is a claim formed along with the company's sales behavior. Therefore, the recognition of accounts receivable is closely related to the recognition of revenue. Accounts receivable are usually recognized at the same time as revenue is recognized. This account sets up detailed accounts for detailed accounting according to different units that purchase goods or receive services.

Definition of factoring business

Factoring business refers to a continuous agreement between the party undertaking factoring and the party selling goods or providing services on credit. The factoring party provides the following services for accounts receivable arising from the sale of goods and provision of services:

(1) Transfer all accounts receivable on demand basis;

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(2) Responsible for the accounting entries and other bookkeeping work related to accounts receivable;

(3) Collect debts when due;

(4) Bear the risk of the debtor's insolvency (i.e. credit risk)