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This article describes a way you can show the purchasing of the debtors and payments in your company file.
This article is provided for guidance only, and might not be suitable for your business requirements. If you need clarification or additional information, check with your accounting advisor or post your question below.
Let's look at the following example:
Using the above example, we'll set up the factoring accounts, then close off the debtors to be factored.
Company ABC needs to set up an account with Bank privileges in the ASSET section of the chart of accounts:
Company ABC also needs to set up an Expense account to show the 5% fee charged by the Factoring Entity:
Note: Use the General Ledger [Summary] report to see the total value of the factored debtors outstanding. These will be shown in the Debit column of the report.
To record the payment from the factoring entity
When Company XYZ pays Company ABC the first 70% of the factored debtors, the payment should be entered through the Receive Money window in the Banking command centre. The account selected at the top left should be your cheque account or the account that the payment will be deposited into. The allocation account would be the Factoring Cheque Account set up in Task 1 above. When Company XYZ pays the other 25%, the same procedure would be followed.
Here's an example:
In the General Ledger [Summary] report these payments will be shown on the Credit side. The net amount will be the factoring charge.
Note that theres is no GST in this transaction.
To show the factoring charges
To show the 5% fee charged by the Factoring Entity, enter a transaction through the Spend Money window as shown below. The account in the top left would be the Factoring Cheque Account and the Allocation account would be the expense account (Factoring Charge) created in Task 1 above.
Here's an example:
The charge will be shown on the Credit column of the General Ledger [Summary] report. Once the additional 25% of the factored amount is received, this transaction will close off completely the Factoring Account to a balance of $0, unless there are other factored debts still outstanding in the same account.
The applicable GST tax code is also included within this transaction as Company XYZ would charge GST for their services.
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