Manager - Finance & Accounts
58404 Points
Joined June 2010
Hey Rupesh! For a direct assignment (in the context of accounting/finance, usually referring to assignment of receivables or debts), here’s a simple scheme of journal entries with an example:
What is Direct Assignment?
Direct assignment means transferring the right to receive payment from a debtor (e.g., accounts receivable) to a third party (assignee) directly, without creating any special purpose vehicle or intermediary.
Example:
-
Company A assigns a debt of Rs. 1L due from Customer X to Company B (assignee).
-
Company B pays Rs. 95K to Company A immediately.
-
The difference Rs. 5K is the assignment fee or discount.
Journal Entries in the Books of Assignor (Company A):
Date |
Particulars |
Debit (Rs.) |
Credit (Rs.) |
|
Bank / Cash |
95K |
|
|
Loss on Assignment (Expense) |
5K |
|
|
To Debtors (Customer X) |
|
1L |
Explanation:
-
Debit Bank with the amount received from Company B.
-
Debit Loss on Assignment for the discount/fee.
-
Credit Debtors to remove the receivable from books.
Journal Entries in the Books of Assignee (Company B):
Date |
Particulars |
Debit (Rs.) |
Credit (Rs.) |
|
Debtors (Customer X) |
1L |
|
|
To Bank / Cash |
|
95K |
|
To Assignment Income |
|
5K |
Explanation:
-
Debit Debtors to record the right to collect the debt.
-
Credit Bank for the amount paid to Company A.
-
Credit Assignment Income (or similar account) for the discount earned.