Getting the Essential Loans is Effective for the Smart Factoring

To avoid financial complexity and protect the company from the risk of non-payment by customers, many business owners prefer factoring wiring. For this, a contract is concluded with the factor firm for servicing the customer’s deliveries with a deferred payment. The main feature is the assignment of receivables.

The accounting factoring is a combination of several parts: financial, managerial. Under the first means financing of the supply of products, various services with a delay in making an amount for them. Management component includes professional management of operations, collection of debt.

Features of factoring transactions

Wiring factoring

Under the contract, the supplier transfers the goods with the possibility of a deferred payment. At the same time, the right to demand a debt transfers to the factor, paying for it a commission. This approach allows firms to sell products, invest in improving their system. However, after the assignment, the original obligations remain on the client, so they continue to bear the risks. He acts as a guarantor of the debtor. The factoring loans are perfect in this matter.

According to the legislation

This requirement is part of the organization’s assets. The sale of an assignment is reflected in all accounting documents as assets. Proceeds from sale will be recorded as operating income.

Basic accounting entries

The organization’s cash flow from the agent is accounted for in the incomes that occurred on the date of the contracting of the factoring contract. When reflecting manipulations under the contract of non-regressive factoring, several basic postings are carried out taking into account:

  • Right of claim at the purchase price.
  • The nominal value of all rights (interest, penalties …).

At accounts on the account of the finance

The implementation of new rights is taken into account. A combination of rights is taken into account, which is calculated in proportion to the amount of the payment part and the nominal price.

The write-off of money occurs from an off-balance account with the observance of the queue specified in the primary agreement. There is a transfer of the result to accounts of accounts from carrying out factoring manipulations.

Calculation of basic parameters

All calculations are better done with the use of a separate sub-account “Settlements under the factoring agreement.” By signing it, the firm sells its debt. The asset is retired. Therefore, at the date of transition, cash flows from:

  • sale of debt;
  • Expenses associated with the implementation of expenditure transactions, sales.
  • If the client does not comply with the terms of the contract, the factor has the ability to make a recovery.

When calculating basic parameters, it is necessary to charge VAT on the transaction. Tax is also on the remuneration of the factor. After the collection of securities, an assignment of rights of claims occurs, and the debt in favor of the agent is written off from the client. This is recorded in Debit 51. The vendor designates the commission and does this using the above postings. The commission is also subject to VAT. Therefore, the tax is displayed.

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