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Add esign Accounts Receivable Financing Agreement

[Music] all right welcome back to our receivable financing this time we are going to focus on factoring so anu habitually receivable financing overview of the receivable financing panorami receivable financing focusing on for reason like paying its current obligations and cash one of the ways parama grace money and some company receivable is so it don't receivable financing and predilem not in the meeting i am adding accounts receivable adding notes receivable technology accounts receivable nanjang pledging assignments at itunes factoring you only have one way using our notes receivable and that's what you call discounting okay pagosapa nothing and discounting in a separate video this time we're going to focus on factoring so i don't buy it on factory nato factoring is the sale of your accounts receivable counts receivable factoring is also a transfer of ownership by transferring the ownership of these accounts receivable to a factor gannitian so the customer owes the company and the company creates this accounts receivable then it don't see company so sabanco or other financial institutions or a finance company in this bank or finance company they are called the factor so after the company sells the accounts receivable to the bank or to the factor the company will then notify the customer of this selling of the accounts receivable so after the company notifies the customer the customer then will directly pay the bank or the factor so ganito puyo transaction [Music] or any other financial companies so it don't factor the first one is what we call casual factoring and the other one is factoring as a continuing agreement so on casual factoring this is a sale of your existing accounts receivable so this is a one-time transaction so bin event existing accounts receivable law okay all right this is the sale of your existing accounts receivable this is a one-time transaction okay then the other one is a factoring as a continuing agreement so anub factoring is a continuing agreement so as the company generates an accounts receivable automatic company nato minivan so the accounting is in casual factoring at factoring as a continuing agreement so in accounting we are going to discuss the casual factoring in the factoring as a continuing agreement separately or individually kasimaki basilan accounting treatment non-factoring nato so pakusava [Music] factoring this is selling your existing accounts receivable it is a one-time transactions okay other finance company the very first thing that we have to do when the company sell our accounts receivable is to determine what is the carrying amount of this accounts receivable so uncaring amount accounts receivable the bin event and company factor to calculate for this carrying amount of the accounts receivable we have our gross accounts receivable then we less our allowance for doubtful accounts then this is your carrying amount of your accounts receivable the bini bantam company this is also what we call the net realizable value of your accounts receivable all right let's say for example we have a accounts receivable of 100 000 then out of this one hundred thousand meron allowance for doubtful accounts let's say for example we have twenty thousand allowance for doubtful accounts accounts receivable nato song ebooks will be in an acting network net realizable value of this accounts receivable or the carrying amount of this accounts receivable is 80 000. all right then from the carrying amount of this accounts receivable and selling price of the accounts receivable not in ibn event accounts receivable nato so we minus the selling price of the accounts receivable and usually it only selling price and accounts receivables a problem being a big amount okay sometimes the selling price is given as percentage of the accounts receivable gross or the carrying amount of the accounts receivable okay all right so young put your selling price depending on problem you won't be small amount non-selling price not adding accounts receivable or mini getting percentage selling price and the difference between the pairing amount at and selling price ito puyong adding lost on factoring okay all right so for example 80 000 na carrying amount now i think accounts receivable the bini benta natin for example bini ben tanaten or the benthanaten nung sixty thousand sixty thousand so we have eighty thousand eighty thousand the carrying amount emma minus nothing young sixty thousand minus nothing and sixty thousand bent and now accounts receivable okay now our entry on this transaction is we debit the cash cash now receive nothing usually union selling price not accounts receivable so we debit our cash so we debit our cash of 60 000 we debit our allowance for doubtful accounts so remember our allowance for doubtful accounts normal balance is credit okay so accounts for doubtful accounts okay so debit allowance of doubtful accounts of twenty thousand then we will recognize our lost on factoring of twenty thousand but lost champion academy so we debit the loss on factoring of twenty thousand then we credit the accounts receivable of one hundred thousand additional accounts receivable not in the one hundred thousand it was a factor so we credit accounts receivable of one hundred thousand so it deploying transactions and journal entries and casual factoring all right now let's talk about factoring as a continuing agreement so this factory as a continuing agreement is a continuous transactions between the factor or the bank or other finance company in our company all right or continuous selling of the accounts receivable between the factor and the company as the company generates this accounts receivable automatic how are we going to account for this factor as a continuing agreement there are two things that you have to consider on this factoring as a continuing agreement i know it won't accounts receivable and this are the commissioned or the factoring fee and the other one is the factors hold back or also we call it receivable from factor all right calculate and commissions or factoring fee this is usually given as a percentage of your accounts receivable factored so the compute not in it so given the percentage sub problem all right i think factors hold back or receivable from factor okay a percentage of the accounts receivable a percentage of the accounts receivable factors hold back it not to charge non-commission or a factoring fee so it own commissions in factoring fee this is actually covers the credit approval the billings the collections and the uncollectible accounts because the factor the assumption of responsibility so the factor yo bumibilina accounts receivable nothing usually the bank or other finance company responsibilities like credit approval that'd be bill silas a customer selena accounts receivable and also they assume the responsibility of the account uncollectible accounts [Music] receivable credit approval responsibility factor so since the factor approves the credit on the sales of the company they assume the uncollectible accounts all right and they charge the company what we called a factoring fee okay you know assuming factory on so but all right it's commission fee [Applause] factor on the part of the company will be an expense all right so factors hold back so a factor's holdback is also a percentage of your accounts receivable nagina charge non-factor kai company okay you know whole new amount nato to allow any sales return and allowances at sales discounts as a customer okay so you don't factors hold back or receivable from factor you know allow not in ito for sales return in allowances at sales discount all right so yand on adding factors hold back okay is a percentage of your accounts receivable on the part of the factor so on the part on this factor's holdback or the receivable from factors on the part of the factor it's payable to the company on the part of the company this is a receivable from the factor okay so these are the two things that you have to know when dealing with factoring as a continuing agreement okay the commission or the factoring fee and the factors hold back or the receivable from factor usually ito percentage non accounts receivable accounts journal entries transaction that involves the factory as a continuing agreement okay all right this are the transactions that involves the um factoring as a continuing agreement all right so ethereum transactions transactions nato all right the first transactions accounts receivable to record this factor accounts receivable we debit cash no manual cash then i received nothing from the factor then we debit our commission fee or predi moringa meeting fee okay and this commission fee account is an expense on the part of the company all right so income statement nothing as an expense that we debit our receivables from factors or factors hold back so guyana because i o young commission fee and receivable fund factors is a percentage of the accounts receivable okay then we will credit our accounts receivable okay let's say for example we factor the accounts receivable of one million so not tire now one million accounts receivable nothing let's say for example the commission fee is um 24 and the receivable from factor or the factors holdback is let's say for example 15 percent all right so the commission fee is 20 of the accounts receivable therefore our commission fee is 200 000. all right then the receivable from factor is 15 meaning it's 150 000 then it's 150 000. all right so therefore the cash proceeds that we receive from the factor is 1 million less 150 000 less 200 000 of commission fee we receive a cash of six hundred and fifty thousand so sometimes some problem hinahana you cash proceeds so factored not accounts receivable all right and sometimes hina hana binyo receivable from the factor all right then alamo compute now another transactions the sales return and allowances remember um our receivable from factors or the factors hold back the reason why the factor is holding some amount of this is to allow some allowances or sales returns and allowances all right so let's say for example return na customer out of this 1 million men will not return a customer now let's say for example 50 000 so it is representing it 50 000 as debit to sales return and allowances and credit to receivable from factor all right so that's our entry kappa menu returned some customers goods or ventana company to record the sales discount remember on the sales discount uh to encourage our customer to to pay promptly we offer a cash discount if you remember um the terms like 2 over 10 and n over 30. so that means if the customer pays um pays the accounts receivable within 10 days or the discount period is 10 days then they will avail a 2 of this count all right our entry for sales discount is debit to sales discount and credit to the receivable fund factor how much is our sales discount if everybody avails the two percent discount so our discount will be one million less than fifty thousand okay why less than fifty thousand that's a young customer not negligent therefore our computations or calculations for this sales discount is one million less fifty thousand which is nine hundred and fifty thousand times two percent and that's going to be nineteen thousand all right but nothing less thousand say some company okay 100 thousand people return including twenty thousand then vinaya and kuyung remaining within the discount period two percent of the eighty thousand amma avail discount to record the collections of the remaining receivables from the factor we debit cash and we credit the receivable fund factor all right so debit to cash and credit to the receivable form factor so how much cash got nothing so fat or this time so continuing okay we debit a fifteen percent of the accounts receivable of hundred and fifty thousand okay so maritime debit no 150 000 then we credit from the sales return transactions we credit the receivable fund factor the 50 000. credit uh okay so we will collect this um cash of 81 000 from the factor then we will credit receivable from factor all right what if there are accounts receivable so remember the commission fee includes the uncollectible accounts the factor assumes the responsibility of the uncollectible accounts because the factor also has the responsibility for the credit approval company allowance for doubtful accounts because but generate many accounts receivable allowance for doubtful accounts this are the journal entries the transactions in the journal entries that involves the factor as a continuing agreement on factoring next video lecture will be discounting so it's a discounting amount involved unknowns receivable i'll see you there [Music]