Washington Business Daily

What is the accounting for Accounts Receivable Funding when purchasing a company?

I Bought a Company in Jan 2007. I am funding the purchase from the Accounts Receivables, ie: I am Paying the previous owner out of the Future Accounts Receivable for One year. What would be the correct Debits and Credits for this type of ongoing transactions?

Public Comments

1. Would it be better to factor your A/R? This is done through Purchase orders and we pick the PO up and send cash minus our fees. Most of the time this is a nominal fee. Lets say for $10,000 purchase order -- when it is all said and done the fees are around $500.