Dictionary / Account Receivable Discounted
What does Account Receivable Discounted mean in accounting?
Quick definition
Accounts payable & receivableAn account receivable that has been assigned or sold with recourse; until paid by the debtor, the amount of the account is the seller's contingent liability. This term guides how bookkeepers record, classify, and explain related transactions in routine financial reporting.
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Examples
Assigning one invoice to the bank with recourse
Your commercial landscape firm invoices a property-management client $9,600 on April 3 for a spring install. On April 9 you need payroll cash, so you assign that open receivable to a bank with recourse. The bank deposits $9,120 into checking and keeps $480 as its fee. When that deposit hits the bank feed in QuickBooks Online or Xero, do not match it to that client's invoice; the customer has not paid anyone yet. Cash is up $9,120, record $480 as a finance charge, and keep $9,600 as a contingent liability until the client pays the bank. If they skip the bill, the bank will charge you.
An early-pay deduction is not this
On November 12 your bike shop invoices a veterinary clinic $2,450 for a staff-fleet tune-up, terms 2/10 net 30. They pay $2,401 on November 18. That $49 off is a cash discount for prompt payment, not an account receivable discounted. Nobody assigned or sold the invoice, and you have no contingent liability. Take the payment against the invoice in QuickBooks Online or Xero and code the $49 to discounts given. The aging should show the invoice closed by the customer, not by a bank.
Why it matters
You need this phrase when you assign or sell an accounts receivable invoice to a bank or factor with recourse. Cash hits your account now, but until the customer pays that buyer, you still carry a contingent liability for the full invoice amount. You will not post this most months; it shows up only when you sell or assign open invoices that way. Treat the deposit as a customer collection, or mix this up with a cash discount for paying early, and the aging looks collected while the remaining risk never appears. A sale without recourse is different: that buyer keeps the credit risk, so this term does not apply.
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What is Account Receivable Discounted in bookkeeping?
An account receivable that has been assigned or sold with recourse; until paid by the debtor, the amount of the account is the seller's contingent liability.
When should I use Account Receivable Discounted?
Use Account Receivable Discounted when the transaction facts match its definition and you need the ledger and financial statements to reflect the correct account and period.
What is a common mistake with Account Receivable Discounted?
Account Receivable Discounted is used for account receivable discounted entries, while Abandonment covers a related but distinct bookkeeping purpose. Review both terms before posting unusual transactions. A common mistake is applying it by label only instead of checking the underlying transaction details.