Answered Essay: which of the following accounts is debited when a company factors its accounts receivable? Service Charge Expense

which of the following accounts is debited when a company factors its accounts receivable? Service Charge Expense e Interest Expense O Loss on Sale of Accounts Receivable Accounts Receivable

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which of the following accounts is debited when a company factors its accounts receivable? Service Charge Expense e Interest Expense O Loss on Sale of Accounts Receivable Accounts Receivable

Expert Answer

 

Question 1: Which of the following account is Debited when company factors its accounts receivable?

Answer: Following Journal Entry will be passed, when company factors its accounts receivable:

Particulars Debit Credit
Cash A/c 420,000
Factoring Expense or Service Charge Expense A/c 30,000
Due from Factor 50,000
To Accounts Receivable 500,000

Therefore, the right answer is Option (a) SERVICE CHARGE EXPENSE A/C.

Note: Numbers used in above Journal Entry are just an examples.

Question 2: Which of the following is the value at which loans and receivables should be reported under IFRS?

Answer: As per International Financial Reporting Standard on Loans and Receivables i.e.. IAS 39, Loans and Receivable should be measured at Amortised Cost.

Therefore, the right answer is Option (d) Amortised Cost.

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