Unless Specific Sales Criteria Are Met, the Factoring of Accounts

question 149

True/False

Unless specific sales criteria are met, the factoring of accounts receivable with recourse is accounted for as a loan.

---

Definitions:

Time-Sales Financing

A financing method where payments are made in installments over a predetermined time period.

Prepayment Penalties

Fees charged to borrowers for paying off a loan early, as compensation for the lender's lost interest income.

Pledge of Inventory

The use of a company's inventory as collateral to secure a loan or meet other financial obligations.

Factoring

A financial transaction where a business sells its accounts receivable to a third party at a discount to raise immediate capital.