How to Record Factoring Discount Fees
Records the specific financing charges or interest components associated with factoring a portfolio of receivables.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Factoring Interest Expense | Expense | 450.00 | - |
| Cash | Asset | - | 450.00 |
💡 Accountant's Note
This entry captures the cost of capital for the period the factoring advance is outstanding, separate from the initial service fee.
Practitioner & Systems Framework
💻 ERP Architecture
Schedule as a recurring interest expense or record upon monthly factor statement reconciliation.
⚠️ Audit Flags
Sudden increases in effective interest rates within factoring agreements.
📄 Required Documentation
Monthly Factoring Statement and Interest Calculation Sheet.
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Related Journal Entries
Supply Chain Finance & Trade Finance
Factoring Without Recourse — True Sale of Receivables (Derecognition Under ASC 860)
Supply Chain Finance & Trade Finance
Factoring With Recourse — Secured Borrowing (Receivables Remain on Balance Sheet)
Supply Chain Finance & Trade Finance
Reverse Factoring / Supplier Finance Program — Buyer's Accounting (ASU 2022-04 Disclosures)
Discussion & Community Questions
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