Factor
Accounting glossary · Understand, connect, apply
A factor is a business that purchases receivables or provides finance secured on them, often also handling collection services.
Example
A firm transfers $10,000 of customer invoices to a factor and receives cash after agreed fees and any reserves.
Remember the difference
Whether receivables are removed from the balance sheet depends on the transfer terms and derecognition rules, not simply the label factoring.
Examples are simplified for learning. Where a term depends on US law, IFRS, US GAAP or a historical rule, check the context explained above and the requirements relevant to your course.
Study references: OpenStax financial accounting and managerial accounting. For reporting requirements, consult the applicable IFRS Standards or FASB guidance. US tax terms should be checked against the relevant tax-year IRS instructions.
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