Sheme of entry for direct assignment

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):

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):

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.