Purchase Agreed and Invoiced:

Debit: Purchases Ledger (Similar if GIT)

Credit: Accounts Payables from Supplier (amount invoiced from the Supplier)

Reverse Factoring | Derecognition of Payables:

Debit: Accounts Payables from Supplier (amount invoiced from the Supplier)

Credit:  Purchases Ledger (Similar if GIT)

Recognition of new liability Agreed and Invoiced (either Operating i.e. Trade or Financing:

Debit: Purchases Ledger (Similar if GIT)

Credit: Accounts Payables or Finance Liability from Financial Institution

Factoring Fee

Debit: Factoring Fee Expense to Financial Institution

Credit : Accounts Payable or Finance Liability (to Financial Institution)

If a fee is charged by the financial institution. As the initiator of the reverse factoring transaction and the beneficiary of early payment discounts, the buyer usually shoulders the cost of the factoring fee. This fee compensates the financial institution for assuming the payment risk and advancing funds to the supplier.

Discount on Payables

Debit: Discount on Payables

Credit : Accounts Payable or Finance Liability (to Financial Institution )

If the amount paid from the financial institution is less than the original invoice amount

Goods Delivered:

Debit: Inventory (Balance Sheet)

Credit: Purchases Ledger (Similar if GIT)

Goods Sold:

Debit: COGS (P&L)

Credit: Inventory (Balance Sheet)

Debit: Accounts Receivables

Credit: Sales

Purchase Invoice Paid by Buyer to Financial Institution:

Debit: Accounts Payables or Finance Liability

Credit: Cash or Bank

Sales Invoice Received from Customer:

Debit: Cash or Bank

Credit: Accounts Receivables