Under Non-Recourse Factoring, the seller makes the following entry of the newspaper: The deposit of debtors can be made without recourse or with recourse. On January 1, 20X5, Impatient Inc. took into account its $100,000 receivables with an 8% tax. Under the terms of the agreement, the company received $82,000 in cash and the remainder of the amount was withheld by the postman as collateral for any wrongdoing. A possible surplus of this amount of security on all rotten receivables was agreed to be repaid by the postman at the end of the settlement period, on December 31, 20X5. In addition, the rate depends on whether it is a remedy or a non-recourse factor. Factoring companies generally calculate a lower rate for recourse than for non-recoursfactoring. If the factor supports the overall risk of non-recourse (in the case of non-recourse factoring), a higher rate is calculated to offset the risk. In the event of an appeal, the company that sells its receivables is still liable to the factoring company if some of these claims prove unrecoverable. In the case of a factoring transaction, the receivables are assessed on their recovery capacity and a fee is agreed between the factor and the seller.
The postman then takes over the receivables with all the relevant documents and pays the cash to the seller after deducting the agreed costs. In addition to this tax, the factor may also retain a small percentage of receivables for a likely adjustment for rebates, returns and certificates. As a general rule, the amount deducted from these adjustments is refunded. The non-recourse factor is riskier than factoring with the use of the factor, which generally results in higher discount rates compared to factoring with recourse. December 31, 20X5: Newspaper entries stand out among the two types of factoring. Since the actual unproductive debt exceeds the amount originally withheld by the factor, Impatient Inc. must pay the factor, an additional $1,000 taking into account the remedy, but there is no such remedy if the factoring is without recourse. Oh, thank you very much for explaining this in a very simple way. Our teacher cannot explain it well.