1. Explain fully receivable financing.

Receivable financing helps the entity to improve its ability to collect

receivables in nearer future. It makes the entity more capable in
converting its receivables to cash. This allows the firm access to working
capital immediately, which is significant particularly if the firm might
else have a cash flow problem.
2. Enumerate the four common forms of receivable financing.
Pledge of accounts receivable
Assignment of accounts receivable
Factoring of accounts receivable
Discounting of notes receivable
3. What are the forms of financing related to accounts receivable?
Pledge of accounts receivable
Assignment of accounts receivable
Factoring of accounts receivable
4. What is pledge of accounts receivable?
Pledge of accounts receivable is done when the borrowing entity uses its
accounts receivable as collateral on a loan. In other words, the loans are
secured by accounts receivable.

7. What is the meaning of nonnotification and notification basis with

respect to assignment of accounts receivable?
Nonnotification basis is when customers do not know that their accounts
have been assigned. Customers still make payments to the assignor. After
that, the assignor will forward the collected receivable to the assignee.
While, notification basis is when customers are informed that their
accounts have been assigned. Thus, customers can remit the receivable
amount directly to the assignee.
8. What is factoring?
Factoring is a financial transaction whereby a borrowing entity sells its
accounts receivable to a factor. In factoring, an entity transferred the
ownership to the factor. Thus, credit risk associated with the accounts
receivable is also transferred.
9. Explain casual factoring and factoring as a continuing agreement.
Casual factoring is when a firm is not confident in its ability to collect on
its accounts receivable, the entity is forced to factor some or all of its
accounts receivable at a considerable discount.
Factoring can be a continuing agreement wherein the factor or the
finance entity purchases all of the accounts receivable of a certain entity.
Before the merchandise is s

5. What is assignment of accounts receivable?

10. What is a credit card?
Assignment of accounts receivable is a lending agreement in which a
borrower (assignor) assigns specific customer account that owes money
(accounts receivable) to the lending institutions for payment of the loan.
6. Distinguish pledge and assignment of accounts receivable.
Pledge of accounts receivable includes all accounts receivable as
collateral security for the loan. While, Assignment of accounts receivable
only includes a specific customers account receivable.

A credit card, a physical plastic payment card, is issued to the holder. It

is used to pay for goods and services at the point of sale based on the
holder's promise to pay for them up to a predetermined limit. Credit
cards are type of personal unsecured loan.
The issuer of the card (usually a bank) creates a revolving account and
grants a line of credit to the cardholder, from which the cardholder can
borrow money for payment to a merchant or as a cash advance.