GK
BANKING AWARENESS AND SEBI
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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What is Factoring?
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A method of discounting of long term bills
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An arrangement for raising short term money against prepaid expenses
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An easy way of raising capital from a factoring company by small business
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Selling of account receivables on a contract basis for cash payment to a factor before it is due
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Explanation:
Detailed explanation-1: -factoring, in finance, the selling of accounts receivable on a contract basis by the business holding them-in order to obtain cash payment of the accounts before their actual due date-to an agency known as a factor.
Detailed explanation-2: -In the process of collecting cash, the Factoring Company acknowledges sales discounts but charges the cost of acknowledged sales discounts to the asset account, “Due from Factor”.
Detailed explanation-3: -Create an account for factored invoices. In your Chart of Account, create a liabilities account just for factored invoices. Create an account for factoring fees. Create an invoice. Record a deposit. Record the fee. Record the received payment. Apply payment to loan.
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