Accounting of factoring and procedures of factoring in Turkey

Becoming even more interdependent in a global economy, companies need new and low-cost financing tools in order to adapt to trade conditions, improve competitiveness and carry on activities safely for a long period of time. The need of such companies for alternative financial resources has led to the rise of faktoring.Faktoring is a financial transaction where accounts receivable (i.e., invoice or equivalent) brought about by sale of any kind of goods and services is sold to a faktorwho in return provides financing and collection to the seller.As the definition suggests, while the basic function of faktoring is buying the future receivables and turning them into cash; the faktor also provides to the client debt management, collection and financing by taking risk.Initially implemented around 1980?s thanks to banks, faktoring transactions rapidly increased every year and became an indispensable financing tool for especially SMEs.The subject of this thesis is studying faktoring as a short term financing tool, investigating it with respect to accounting and explaining the recognition process.Key words: factoring, accounting for factoring transactions