Assigning Accounts Receivable

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In this case, Company A has pledged $200,000 of accounts in exchange for a loan of $100,000.

Assignment of accounts receivable is a written agreement between a lender and a borrower in which the borrower pledges accounts receivable as collateral.

Usually, the borrowing company would itself collect the assigned receivables and remit the loan amount as per agreement.

It is only when the borrower fails to pay as per agreement, that the lender gets a right to collect the assigned receivables on its own.

For a fuller explanation of journal entries, view our examples section, and our tutorial on receivables financing.

He has worked as an accountant and consultant for more than 25 years in all types of industries.It is important to note that the receivables are not sold/transferred under an assignment agreement.If the receivables have been transferred, the agreement would be of sale/factoring of accounts receivable.The assignment of accounts receivable journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accounts receivable assignment.In each case the assignment of accounts receivable journal entries show the debit and credit account together with a brief narrative.The cash advance less the initial fee charged by the lending company is recorded by debiting the Cash account for the amount of the loan less the initial fee, debiting the finance charge account for the amount of the initial fee, and crediting Notes payable by the amount of the loan, if the borrowing company issues a promissory note.If the borrowing company signs a loan agreement instead of issuing a promissory note, the entry above should be changed as follows: When assigned accounts receivable is collected, it should be recognized by debiting the Cash account and crediting accounts receivable.The principal amount is to be repaid in 45 days on November 25, 20X8, as well as interest at 10%. Retail X LTD collected all the accounts receivable pledged as collateral by November 25, 20X8.Assignment of accounts receivable is an agreement between a lending company and a borrowing company in which the later assigns its accounts receivable to the former in return for a loan.This website uses cookies to improve user experience, track anonymous site usage, store authorization tokens and permit sharing on social media networks.By continuing to browse this website you accept the use of cookies.

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