Factoring accounts

JodieR Registered Posts: 1,002 Beyond epic contributor 🧙‍♂️
I've been doing some bookkeeping for a client who factors his invoices. I set up a bank account for the factoring account and it's fairly simple to keep track of - I Dr the factoring account when invoices are factored and Cr it when money is transferred out to the bank account and reconcile it against the 'current account' figures on the statements received from HSBC. However, on the factoring statements they also show what's called a 'Discounting account' and then show a 'ledger balance' which is the sum of the current account and the discounting account. The discounting account changes when HSBC receive money from the customers.
I've now got the accounts from the accountant from before I started and the balance on the balance sheet for the factoring account is the Ledger balance, whereas I was expecting it to be the current account balance. I know the accounts were done in a hurry last year so is this just an error they've made or have I got it wrong? If I've got it wrong can someone please explain the logic behind showing the ledger balance in the balance sheet.


  • truecockney
    truecockney Registered Posts: 94 Regular contributor ⭐
    The Sales Ledger Balance should be listed under the Current Assets, with the Factoring Account balance showing as a Current Liability.

    The other method is to use the "Full ledger balance - Factored funds" as a current asset (similarly listed as a contra) however this is very rarely used as it doesn't exactly show a true and fair position of the company.
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