Hi
Hope these entries are satisfying to get a gist of Cash Operating Cycle and Factoring. Discount philosophy- can apply discount when annualised discount factor > cost of finance.
Production & Finished goods |
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| Dr. | WIP | |||||||||||||
| Dr. | Other Conversion Exps. | |||||||||||||
| Dr. | Finished Inventory | |||||||||||||
| Cr. | Payables | |||||||||||||
|
Sales |
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| Dr. | Receivables | |||||||||||||
| Dr. | Discount | |||||||||||||
| Dr. | Cash | |||||||||||||
| Cr. | Sales | |||||||||||||
|
Financing Costs |
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| Dr. | Finance cost | |||||||||||||
| Cr. | Payables | |||||||||||||
|
Invoice Discounting 100% |
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| Dr. | Bank | |||||||||||||
| Dr. | Discounted @ 3% 1 month | |||||||||||||
| Cr. | Receivables | |||||||||||||
| Cr. | Payables | |||||||||||||
|
Liabilities |
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| Dr. | Payables | |||||||||||||
| Cr. | Bank | |||||||||||||
Note : derecognise receivables to the extent discounted only and expense the discounted amount. Or can follow the above way if charges are paid later as it solely depends on the banking procedure.
eg.
| Dr. | Bank | |
| Dr. | Discounted @ 3% 1 month | |
| Cr. | Receivables | |
Attached File : 2750458 20210126173103 123.xlsx downloaded: 73 times
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