Sheme of entry for direct assignment

Any one who can help with sheme of entries along with example?
Replies (1)

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.

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