Let’s say a business has $100,000 in eligible accounts receivable and the advance rate is 80%. After receiving payment in full, the factoring company clears the remaining balance, typically 1 – 3%, to the selling company. The factoring company makes a profit by collecting on the full amount of the invoice. The factoring company then

The same is true for direct labour, as management knows how many units will be manufactured and how many hours of direct labour are needed. The necessary hours of direct labour and the estimated labour rate are used to develop the direct labour budget. While the materials and labour are determined from the production budget,

Deferred expenses are expenses that have been incurred but have not yet been paid. For example, if a company has received services but has not yet paid for them, the company would record a deferred expense entry. Debits will equal credits (unless something is terribly wrong with your system). A nominal account is an account

Current book value is the asset’s net value at the start of an accounting period. It’s calculated by deducting the accumulated depreciation from the cost of the fixed asset. While the straight-line depreciation method is straight-forward and most popular, there are instances in which it is not the most appropriate method. Assets are usually more

The level of maintenance and upkeep performed on an asset throughout its lifespan can affect its salvage value. Proper maintenance and regular upkeep can help preserve an asset’s condition and functionality, increasing its salvage value. On the other hand, neglected or poorly maintained assets may have a reduced salvage value due to their diminished condition.