Accounting for invoice discounting

I am researching how to account for invoices which have been discounted, and I am finding two conflicting methods. I am hoping some experts out there can go back to basics with me and advise on the correct double entry.

1.On commencement of the discounting facility an advance will be made against the book debt of say for example 95%. What is the double entry for the immediate advance? Would it be DR a ID bank account set up in own accounts , CR short term loan? I am gathering the sales ledger remains untouched and is only used as security and not effectively sold to the discounter?

2.Double entry for the receipt of the funds too please....I think I may be over thinking this one as it seems very complicated...but I am very very rusty. My research has suggested crediting the sales ledger for full amount then raising a credit note for the 5% not advanced and charging to factoring cost?? No mention of it having an effect on the available funds in the ID bank account or on the amount owed to the discounter.

Please help?!?!

Thanks in advance.

 

Comments
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1 Correct

petersaxton |
petersaxton's picture

Many thanks for your response

LeighM |

and don't forget

nigelburge |
nigelburge's picture

Charges

petersaxton |
petersaxton's picture

Oh God...VAT complications

LeighM |

Thanks Peter

LeighM |

...sorry peter...just re

LeighM |

Accounting and problems

petersaxton |
petersaxton's picture

Thanks so much. The fog has

LeighM |

invoice discounting

Paul FD |

More to it than first appears

Robjoy |

Excel

petersaxton |
petersaxton's picture

Accounting for Invoice Discounting / Factoring Transactions

pete_t |

Need and usefulness

petersaxton |
petersaxton's picture

Need and usefulness

pete_t |

My view

petersaxton |
petersaxton's picture

Discounting v Factoring

Robjoy |

ACCOUNTING FOR INVOICE DISCOUNTING FACILITIES

jjuuko joseph kiyimba |

No

petersaxton |
petersaxton's picture