Sale of accounts receivable

In QuickBooks, you can record the sale of accounts receivable using a journal entry. The sale of accounts receivable typically involves a factor or financing company buying your outstanding invoices at a discount. Here’s how to record this transaction:

Step 1: Create a Journal Entry for the Sale:

1. Go to the QuickBooks homepage.
2. Click on the “Create” button (usually represented by a plus “+” sign) at the top of the screen.
3. Under the “Other” column, select “Journal Entry.”

Step 2: Enter the Sale of Accounts Receivable Details:

In the journal entry:

• Debit an appropriate cash or bank account for the net amount you received from the sale of accounts receivable. This represents the actual cash you received from the factor.
• Credit the “Accounts Receivable” account for the total amount of the accounts receivable sold. This represents the reduction in your accounts receivable balance.
• Credit an account to represent the discount or fee charged by the factor. This should be a separate expense account, such as “Factoring Fees” or “Discount on Sale of Receivables.”
• Add a memo or description to explain the nature of the entry, including the date of the sale, the factor’s name, and any reference numbers.

Step 3: Review and Save the Journal Entry:

Review the journal entry details to ensure accuracy and save the journal entry.

Step 4: Reconcile Your Accounts:

After recording the sale of accounts receivable, reconcile your accounts in QuickBooks with your actual bank or credit card statements to ensure accuracy.

Step 5: Document the Transaction:

Keep proper documentation related to the sale of accounts receivable, including agreements with the factor, invoices, and any relevant paperwork.

Step 6: Consult with Your Accountant:

The sale of accounts receivable may have accounting and tax implications, and it’s advisable to consult with your accountant or financial advisor to ensure that you’re correctly accounting for the transaction and addressing any specific tax or compliance requirements.

By following these steps, you can accurately record the sale of accounts receivable in QuickBooks, helping you maintain accurate financial records and account for the cash received from factoring companies or other financial institutions.

QuickBooks, a potent financial management tool for small businesses, is commonly employed alongside a dedicated bookkeeper for small business owners.