Factoring Accounts Receivable Journal Entries

Dive into the practical world of managing accounts receivable when direct payment isn't an option with Nick. In this engaging video, explore how businesses, like manufacturing companies, handle large receivables by using factoring services. Nick demonstrates the journal entries needed when a business decides to sell or factor its receivables to a third party, such as a bank or collection agency, for immediate cash flow, detailing the initial accounting for the cash received and the fees involved. He also covers potential scenarios, such as handling reserves held back by the factor and the final cash transactions when the customer pays, providing a clear, step-by-step breakdown of each part of the process.