How to Record Recourse Factoring Provision
Recording the bad debt provision for receivables sold with recourse to the seller.
| Account Name | Type | Debit ($) | Credit ($) |
|---|---|---|---|
| Bad Debt Expense (Factored) | Debit | 1,200.00 | - |
| Allowance for Recourse Liability | Credit | - | 1,200.00 |
💡 Accountant's Note
In recourse factoring, the seller retains the credit risk. A provision must be made if the factored customer is likely to default.
Practitioner & Systems Framework
💻 ERP Architecture
Adjustment via General Journal entry based on aging of factored invoices.
⚠️ Audit Flags
Unexpected charge-backs from the factor without corresponding provisions.
📄 Required Documentation
Aging report from the factor and credit assessment files.
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Expert Analysis by Qusai Ahmad
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Specialized in SAP GUI automation and Middle Eastern tax compliance. Building digital tools for the next generation of finance leaders.
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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