Assignment Of Accounts Receivable

AAA

DEFINITION of 'Assignment Of Accounts Receivable'

A lending agreement, often long term, between a borrowing company and a lending institution whereby the borrower assigns specific customer accounts that owe money (accounts receivable) to the lending institution. In exchange for assignment of accounts receivable, the borrower receives a cash advance for a percentage of the accounts receivable. The borrower pays interest and a service charge on the advance.

INVESTOPEDIA EXPLAINS 'Assignment Of Accounts Receivable'

If the borrower retains ownership of the accounts, then the borrower continues to collect the accounts receivable and passes the payments on to the lender. Since the borrower retains ownership, he also retains the risk that some accounts receivable will not be repaid. In this case, the lending institution may demand payment directly from the borrower. This arrangement is called assignment of accounts receivable with recourse. Assignment of accounts receivable should not be confused with pledging or factoring of accounts receivable.

RELATED TERMS
  1. Full Recourse Debt

    A guarantee that no matter what happens, the borrower will repay ...
  2. General Ledger

    A company's main accounting records. A general ledger is a complete ...
  3. Finance

    The science that describes the management, creation and study ...
  4. Non-Recourse Finance

    A loan where the lending bank is only entitled to repayment from ...
  5. Non-Recourse Debt

    A type of loan that is secured by collateral, which is usually ...
  6. Assignment Of Proceeds

    A document transferring all or part of the proceeds from a letter ...
Related Articles
  1. Small Business: Speed Up Receivables ...
    Entrepreneurship

    Small Business: Speed Up Receivables ...

  2. A Look At Accounting Careers
    Personal Finance

    A Look At Accounting Careers

  3. Intangible Assets Provide Real Value ...
    Markets

    Intangible Assets Provide Real Value ...

  4. What is the difference between a non-recourse ...
    Investing

    What is the difference between a non-recourse ...

comments powered by Disqus
Hot Definitions
  1. Accounts Payable - AP

    An accounting entry that represents an entity's obligation to pay off a short-term debt to its creditors. The accounts payable ...
  2. Ratio Analysis

    Quantitative analysis of information contained in a company’s financial statements. Ratio analysis is based on line items ...
  3. Days Payable Outstanding - DPO

    A company's average payable period. Calculated as: ending accounts payable / (cost of sales/number of days).
  4. Net Sales

    The amount of sales generated by a company after the deduction of returns, allowances for damaged or missing goods and any ...
  5. Over The Counter

    A security traded in some context other than on a formal exchange such as the NYSE, TSX, AMEX, etc. The phrase "over-the-counter" ...
  6. Earnings Before Interest After Taxes - EBIAT

    A financial measure that is an indicator of a company's operating performance. EBIAT, which is equivalent to after-tax EBIT ...
Trading Center