Adrian L.

Galapon
 Nature Entry
1.Pledge General/Informal No entry for AR
Collateral of AR
2.Assignment Specific/Formal Reclassfication
3.Factoring Sale of AR Derecognition if w/o recourse
4.Discounting of note Sale of NR Derecognition
 Pledge Assignment
AR - assigned
No Entry (disclosure only)
AR
PLEDGE
PLEDGE
 ASSIGNMENT COLLECTION
NON-NOTIFICATION ENTITY
Assignor ENTITY
NOTIFICATION BANK
Assignee BANK
Required Disclosure
AR assigned XXX
Less: Notes Payable XXX
Equity in Assigned Accounts XXX
non-notification notification
Collection Cash
Sales Discount
AR- assigned Notes payable
Sales discount
Remittance Notes payable Interest expense
Interest Expense AR-assigned
Cash
ASSIGNMENT – Non-Notification
ASSIGNMENT – Notification
ASSIGNMENT – Non-Notification
ASSIGNMENT – Non-Notification
ASSIGNMENT – Notification
 Factoring
• Factoring is a sale of accounts receivable usually on a without recourse, notification basis.
(derecognition)
• Gain or loss is recognized for the difference between the proceeds and the carrying amount of the
receivables factored.
• Usually there is a factor’s holdback to cover non-credit related risk such as sales returns and allowances.
This would be returned if there are no such sales returns.

• Casual factoring - one time transaction in case of need

• Factoring as a continuing agreement – all receivables
Casual Continuing Agreement
Cash Cash
Allowance for DA Allowance for DA
Loss on factoring Commission (exp)
Receivable from factor Receivable from factor
Accounts receivable Accounts receivable
 Factoring
• On June 1, 2022, Factee sold P5,000,000 of its accounts receivable for P4,000,000. Allowance for
doubtful accounts amounted to P100,000.

Cash 4,000,000
Allowance for DA 100,000
Loss on factoring 900,000
Accounts receivable 5,000,000
Factoring w/o recourse
Factoring w/o recourse
Factoring w/o recourse
Factoring
Factoring w/o recourse

Cash 4,500,000
Allowance for doubtful accts 200,000
Receivable from factor 600,000
Loss on factoring/Commision 700,000
AR 6,000,000
 Discounting of Note

w/o recourse w/recourse -conditional sale w/recourse - secured borrowing

Discounting Cash Cash Cash
Loss on NRD Loss on NRD Interest expense
Notes Receivable Notes Receivable Discounted * Liability for NRD*
Interest Income Interest Income Interest Income

Maturity value * deducted from NR in FS Presentation * Presented under liabilities

Less: Discount
Selling Price AR AR
Less: Carrying amount Cash Cash
Loss
NRD Liability for NRD
NR NR
Discounting of Note
Discounting of Note
Discounting of Note
Discounting of Note
Discounting of Note
Discounting of Note
Discounting of Note
Discounting of Note
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