USA AR Line of Credit

[Kyle Wagner]

Hi- We have entered into an agreement with a 3rd party for an accounts receivable line of credit. The 3rd party will advance us cash based on a set percentage of our total outstanding receivables. Our customers will pay the 3rd party directly. How should this be accounted for?

 

[Drmdcpa]

Book borrowings as line of credit, short term liability.

When client pays book the receipt to remove the recievable. Then allocate funds between interest expense and principle for the line of credit