How to Record Non-Recourse Factoring Loss
Records the derecognition of a receivable asset when the factor assumes the credit risk loss.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Loss on Sale of Receivables | Expense | 10,000.00 | - |
| Factoring Asset - Retained | Asset | - | 10,000.00 |
💡 Accountant's Note
In non-recourse factoring, the loss is shifted to the factor; however, if a portion was retained/reserved, it must be written off if the debtor defaults.
Practitioner & Systems Framework
💻 ERP Architecture
Adjust the factoring reserve account in the AR module to reflect the uncollectible amount.
⚠️ Audit Flags
Large write-offs on factored receivables that were previously recorded as off-balance sheet.
📄 Required Documentation
Notice of default from the factor and non-recourse contract terms.
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Expert Analysis by Qusai Ahmad
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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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