or financing charge or commission for

CHAPTER 13: the assignment agreement.

RECEIVABLE FINANCING
Financial flexibility/capability of an entity to
raise money out of its receivables.
The entity must maintain cash payments for
obligations.

1. PLEDGE OF ACCOUNTS
RECEIVABLE
General because all accounts receivable serve
as collateral security for the loan.
To record loan:
Cash, and discount on note payable if
discounted xx
Note payable.
xx

To record subsequent payment:

DR. Note payable xx
CR. Cash xx

2. ASSIGNMENT OF ACCOUNTS
RECEIVABLE
 Specific because specific accounts
receivable serve as collateral security for
the loan.
 Secured borrowing evidenced by a
financing agreement and a promissory
note both of which the assignor/borrower
signs.
 Assignor transfers its rights in some of its
accounts receivable to a lendee/assignee
in consideration for a loan.
 The assignor retains ownership of the
accounts assigned.

FEATURES OF ASSIGNMENT:
a) May be done on non-
notification/notification basis
b) Before entering into an assignment, the
assignee, usually a bank or a finance
entity, analyzes the borrower’s accounts
receivable.
c) Assignee usually charges interest for the
loan that it makes and requires a service