Selling the rights to collect accounts receivable to an entity outside the business is called _____.
A) factoring
B) pledging
C) reconciling
D) outsourcing

Question

Quizplus · Accepted Answer

Factoring refers to selling the rights to collect accounts receivable to a third-party entity (known as a factor) in exchange for immediate cash. This allows the business to receive a lump sum of cash upfront instead of waiting for customers to pay their invoices. Pledging, reconciling, and outsourcing do not specifically relate to the sale of accounts receivable.

Selling the Rights to Collect Accounts Receivable to an Entity