what the accounting treatment of discounting of receivables

Question

i need to know the accounting treatment of discounting of receivables and the presentation of it

Comments

What type of receivables are you referring? Is it trade receivables / debtors?

Answer 1

Discounting of receivables means you are giving your receivables to a financial institution to get cash or cash equilants,  

We will account for it as follows

Cash/bank.       DR
Interest expense DR

      Receiables.     CR

Financial institution will not pay whole amount of cash against receiable value,  obviously they have to wait till maturity of receivable to convert it into cash so they charge interst on it. Which ia recognized as expense