Purchase of book debt

Purchase of book deb

Didn't find your answer?

What is the accounting treatment/ journal entries when a client purchases book debt?

Example figures:

Book debt which includes 100k worth of debtors

Book debt purchased for 20K

Thanks in advance!

Replies (4)

Please login or register to join the discussion.

Scalloway Castle
By scalloway
11th Aug 2016 15:27

It is an asset that can be realised so:
Dr Debtors
Cr Bank

Thanks (1)
Replying to scalloway:
avatar
By Edward95
11th Aug 2016 15:40

How would you value the asset, at purchase price? Or at the value of debtors?

DR Debtors 100k

CR Bank 20K

What is done with the 80k?

Thanks (0)
Replying to Edward95:
Routemaster image
By tom123
11th Aug 2016 16:20

Lower of cost or Net Realisable Value, as with every other asset..

If you recover more than you paid, that is a profit for you.

If you valued the asset at more than 20k, where would you put the difference?

Thanks (0)
Scalloway Castle
By scalloway
11th Aug 2016 16:23

Dr Debtors £20,000
Cr Bank £20,000

The £80,000 is irrelevant for your business in my opinion. You paid £20,000 for something that may or not be realised, hence the discount on the purchase price. When you have pursued the debt and finally agree that you have collected all you are going to collect you will end up with a profit or loss on realisation in the P&L.

Thanks (0)