What is factoring?

A financing method in which a business owner sells accounts receivable at a discount to a third-party funding source to raise capital and meet the finance requirement.

Factoring is a process during which company sells their AR to a third party called factor. There is recourse factoring as well non-recourse factoring.

Factoring Is The Process In Which U Out Source The Collection of Receivable.

Factoring means selling the receivables to a third party (factor) for meeting immediate cash requirements. I.e. cash will be paid immediately for the debtors taken over, but at a discounted value. Journal entry will be Factor's a/c Dr Discount a/c Dr To Debtors' a/c Cash a/c Dr To Factor's a/c