assignment of an account

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Assignments.

The assignments in this course are openly licensed, and are available as-is, or can be modified to suit your students’ needs. Answer keys are available to faculty who adopt Lumen Learning courses with paid support. This approach helps us protect the academic integrity of these materials by ensuring they are shared only with authorized and institution-affiliated faculty and staff.

If you import this course into your learning management system (Blackboard, Canvas, etc.), the assignments will automatically be loaded into the assignment tool.

You can view them below or throughout the course.

• Module 0: Personal Accounting— Assignment: Creating a Budget
• Module 1: The Role of Accounting in Business— Assignment: Lopez Consulting
• Module 2: Accounting Principles— Assignment: Accounting Principles
• Module 3: Recording Business Transactions— Assignment: Recording Business Transactions
• Module 4: Completing the Accounting Cycle— Assignment: Completing the Accounting Cycle
• Module 5: Accounting for Cash— Assignment: Accounting for Cash
• Module 6: Receivables and Revenue— Assignment: Manilow Aging Analysis
• Module 7: Merchandising Operations— Assignment: Merchandising Operations
• Module 8: Inventory Valuation Methods— Assignment: Inventory Valuation Methods
• Module 9: Property, Plant, and Equipment— Assignment: Property, Plant, and Equipment
• Module 10: Other Assets— Assignment: Other Current and Noncurrent Assets
• Module 11: Current Liabilities— Assignment: Calculating Payroll at Kipley Co
• Module 12: Non-Current Liabilities— Assignment: Non-Current Liabilities
• Module 13: Accounting for Corporations— Assignment: Collins Mfg Stockholders’ Equity
• Module 14: Statement of Cash Flows— Assignment: Kachina Sports Company Cash Flows
• Module 15: Financial Statement Analysis— Assignment: Coca Cola FSA

Discussions

The following discussion assignments will also be preloaded (into the discussion-board tool) in your learning management system if you import the course. They can be used as is, modified, or removed. You can view them below or throughout the course.

• Module 0: Personal Accounting— Discussion: Winning the Lottery
• Module 1: The Role of Accounting in Business— Discussion: The Crafty Coffee Crook
• Module 2: Accounting Principles— Discussion: SoftSheets
• Module 3: Recording Business Transactions— Discussion: Baker’s Breakfast Bars
• Module 4: Completing the Accounting Cycle— Discussion: Closing the Books in QuickBooks
• Module 5: Accounting for Cash— Discussion: Counter Culture Cafe
• Module 6: Receivables and Revenue— Discussion: Maximizing Revenue
• Module 7: Merchandising Operations— Discussion: Inventory Controls
• Module 8: Inventory Valuation Methods— Discussion: LIFO, FIFO, Specific Identification, and Weighted Average
• Module 9: Property, Plant, and Equipment— Discussion: Cooking the Books
• Module 10: Other Assets— Discussion: Other Assets
• Module 11: Current Liabilities— Discussion: Current Liabilities
• Module 12: Non-Current Liabilities— Discussion: Off-Balance Sheet Financing
• Module 13: Accounting for Corporations— Discussion: Home Depot
• Module 14: Statement of Cash Flows— Discussion: Facebook, Inc.
• Module 15: Financial Statement Analysis— Discussion: Financial Statement Analysis

Alternative Excel-Based Assignments

For Modules 3–15, additional excel-based assignments are available below.

Module 3: Recording Business Transactions

• Module 3 Excel Assignment A
• Module 3 Excel Assignment B

Module 4: The Accounting Cycle

• Module 4 Excel Assignment A
• Module 4 Excel Assignment B
• Module 4 Excel Assignment C
• Module 4 Excel Assignment D

Module 5: Accounting for Cash

• Module 5 Excel Assignment

Module 6: Receivables and Revenue

• Module 6 Excel Assignment A
• Module 6 Excel Assignment B

Module 7: Merchandising Operations

• Module 7 Excel Assignment

Module 8: Inventory Valuation Methods

• Module 8 Excel Assignment A
• Module 8 Excel Assignment B
• Module 8 Excel Assignment C

Module 9: Property, Plant, and Equipment

• Module 9 Excel Assignment A
• Module 9 Excel Assignment B

Module 10: Other Assets

• Module 10 Excel Assignment

Module 11: Current Liabilities

• Module 11 Excel Assignment

Module 12: Non-Current Liabilities

• Module 12 Excel Assignment A
• Module 12 Excel Assignment B

Module 13: Accounting for Corporations

• Module 13 Excel Assignment A
• Module 13 Excel Assignment B
• Module 13 Excel Assignment C

Module 14: Statement of Cash Flows

• Module 14 Excel Assignment A
• Module 14 Excel Assignment B

Module 15: Financial Statement Analysis

• Module 15 Excel Assignment

Review Problems

There are also three unit review assignments and a final review. These reviews include a document which sets up the problems and an excel worksheet.

Unit 1 Review Problem (After Module 6)

• Review Problem Document

Unit 2 Review Problem (After Module 8)

Unit 3 review problem (after module 9), final review (after module 15).

• Assignments. Authored by : Cindy Moore and Joe Cooke. Provided by : Lumen Learning. License : CC BY: Attribution

• Receivables
• Notes Receivable
• Credit Terms
• Cash Discount on Sales
• Accounting for Bad Debts
• Bad Debts Direct Write-off Method
• Bad Debts Allowance Method
• Bad Debts as % of Sales
• Bad Debts as % of Receivables
• Recovery of Bad Debts
• Accounts Receivable Aging
• Assignment of Accounts Receivable
• Factoring of Accounts Receivable

Assignment of accounts receivable is an agreement in which a business assigns its accounts receivable to a financing company in return for a loan. It is a way to finance cash flows for a business that otherwise finds it difficult to secure a loan, because the assigned receivables serve as collateral for the loan received.

By assignment of accounts receivable, the lender i.e. the financing company has the right to collect the receivables if the borrowing company i.e. actual owner of the receivables, fails to repay the loan in time. The financing company also receives finance charges / interest and service charges.

It is important to note that the receivables are not actually sold under an assignment agreement. If the ownership of the receivables is actually transferred, the agreement would be for sale / factoring of accounts receivable . Usually, the borrowing company would itself collect the assigned receivables and remit the loan amount as per agreement. It is only when the borrower fails to pay as per agreement, that the lender gets a right to collect the assigned receivables on its own.

The assignment of accounts receivable may be general or specific. A general assignment of accounts receivable entitles the lender to proceed to collect any accounts receivable of the borrowing company whereas in case of specific assignment of accounts receivable, the lender is only entitled to collect the accounts receivable specifically assigned to the lender.

The following example shows how to record transactions related to assignment of accounts receivable via journal entries:

On March 1, 20X6, Company A borrowed $50,000 from a bank and signed a 12% one month note payable. The bank charged 1% initial fee. Company A assigned $73,000 of its accounts receivable to the bank as a security. During March 20X6, the company collected $70,000 of the assigned accounts receivable and paid the principle and interest on note payable to the bank on April 1. $3,000 of the sales were returned by the customers.

Record the necessary journal entries by Company A.

Journal Entries on March 1

Initial fee = 0.01 × 50,000 = 500

Cash received = 50,000 – 500 = 49,500

The accounts receivable don't actually change ownership. But they may be to transferred to another account as shown the following journal entry. The impact on the balance sheet is only related to presentation, so this journal entry may not actually be passed. Usually, the fact that accounts receivable have been assigned, is stated in the notes to the financial statements.

Journal Entries on April 1

Interest expense = 50,000 × 12%/12 = 500

by Irfanullah Jan, ACCA and last modified on Oct 29, 2020

Related Topics

• Sales Returns

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Pledging Accounts Receivable

Written by True Tamplin, BSc, CEPF®

Reviewed by subject matter experts.

Updated on January 30, 2024

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Definition and explanation.

Pledging accounts receivable is essentially the same as using any asset as collateral for a loan. Cash is obtained from a lender by promising to repay.

If the loan is not repaid, the collateral will be converted to cash, and the cash will be used to retire the debt.

The receivables can be either an identified set of notes and accounts or a general group in which new ones can be added and old ones retired.

The collection of a pledged receivable has no impact on the loan balance.

The pledging agreement usually calls for the substitution of another receivable for the one collected.

As an example, suppose that Sample Company borrows $80,000 on 31 December 2023, and agrees to pay back $81,600 on 1 April 2024.

Further, it pledges $100,000 of trade receivables for the loan. The company would make three journal entries as follows:

The last two entries can be combined, but they are shown separately here to facilitate a comparison of pledging with the other approaches.

The only financial statement disclosures provided for pledged receivables are notes or parenthetical comments.

A similar notation is provided for the notes payable .

Assignor Collects

As an alternative to pledging, the company may decide to assign its receivables to a lending institution.

Under this arrangement, the original holder essentially transfers title to the third party but agrees to collect the receivables and pay the cash to the factor .

Suppose that Sample Company obtains $80,000 cash on 31 December 2023 by assigning $100,000 of its trade receivables.

The company agrees to place the collections in a special restricted checking account from which it will repay the original $80 000 plus a $2,400 finance charge on April 1, 2024.

These journal entries would be made as follows:

To record partial collection of the assigned accounts :

To accrue the finance charge:

To reclassify the uncollected accounts and unrestricted cash:

The disclosures that would be provided on various balance sheet dates are shown in the following example, under the simplifying assumption that no other activity took place.

Notice that the payable to the factor is contra to the assigned accounts. Any restricted cash balance is, in turn, contra to the payable account.

Most arrangements of this type call for more frequent payments than the example shows.

The net result of the assignment is that Sample Company obtained $80,000 by giving up $82,400 of receivables.

Pledging Accounts Receivable FAQs

What is pledging accounts receivable.

Pledging Accounts Receivable means that a business gives up some of its rights to an asset in order to borrow money. For example, you could pledge your car title as collateral for a loan. If the loan isn't repaid, the lender can take possession of your car.

What are the journal entries for pledging accounts receivable?

There are no Special Journal entries required when you pledge your Accounts Receivable as collateral for a loan. The lender still has to approve giving up your Accounts Receivable before making the loan.

How are accounts receivable journal entries prepared?

Accounts Receivable are money owed to a company by their customers for products they've already received. Accounts are recorded in the balance sheet as assets.

What are the journal entries for assigning Accounts Receivable as collateral for a loan?

The entry to record assignment of Accounts Receivable as collateral would be a credit to cash, and a debit to assign Accounts Receivable. The cash account is debited because the company gave up the assigned receivables. The assign Accounts Receivable account is credited because they still owe this money to their customers.

What are the main financial statements in an assignment of accounts receivable?

The three main Financial Statements in an assignment of Accounts Receivable are the income statement, balance sheet, and Cash Flow statement. The income statement and Cash Flow statements would report the repayments on the receivables.

About the Author

True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True is a Certified Educator in Personal Finance (CEPF®), author of The Handy Financial Ratios Guide , a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University , where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website or view his author profiles on Amazon , Nasdaq and Forbes .

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Home > Accounts Receivable > Assignment of Accounts Receivable Journal Entries

Assignment of Accounts Receivable Journal Entries

The assignment of accounts receivable journal entries below act as a quick reference, and set out the most commonly encountered situations when dealing with the double entry posting of accounts receivable assignment.

The assignment of accounts receivable journal entries are based on the following information:

• Accounts receivable 50,000 on 45 days terms
• Assignment fee of 1% (500)
• Initial advance of 80% (40,000)
• Cash received from customers 6,000
• Interest on advances at 9%, outstanding on average for 40 days (40,000 x 9% x 40 / 365 = 395)

About the Author

Chartered accountant Michael Brown is the founder and CEO of Double Entry Bookkeeping. He has worked as an accountant and consultant for more than 25 years and has built financial models for all types of industries. He has been the CFO or controller of both small and medium sized companies and has run small businesses of his own. He has been a manager and an auditor with Deloitte, a big 4 accountancy firm, and holds a degree from Loughborough University.

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What is the Assignment of Accounts Receivable?

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Assignment of accounts receivable.

Assignment of accounts receivable is a financing arrangement in which a company uses its accounts receivable as collateral to obtain a loan or financing from a financial institution or a lender. In this arrangement, the company “assigns” or transfers the rights to collect payments from the outstanding accounts receivable to the lender.

The lender then provides the company with a percentage of the assigned accounts receivable value as a loan, while retaining a portion as collateral or to cover potential defaults. The company is still responsible for collecting payments from its customers. When the customers make payments, the company forwards the collected amount to the lender, who applies the payment to the outstanding loan balance.

The assignment of accounts receivable is a common financing option for businesses with cash flow constraints or those that need immediate funding for working capital requirements or other short-term financial needs.

Example of the Assignment of Accounts Receivable

Let’s consider a fictional company, ABC Corp., that manufactures and sells electronics. ABC Corp. has $200,000 worth of outstanding accounts receivable, but it needs immediate cash to purchase raw materials and pay its employees.

ABC Corp. approaches XYZ Bank to obtain financing using its accounts receivable as collateral. XYZ Bank agrees to provide a loan of 85% of the total accounts receivable value, which amounts to $170,000 (85% of $200,000).

In this arrangement, ABC Corp. assigns the accounts receivable to XYZ Bank, and XYZ Bank provides the company with $170,000 in financing. ABC Corp. remains responsible for collecting payments from its customers.

As customers of ABC Corp. pay their invoices, the company forwards the collected payments to XYZ Bank. XYZ Bank then applies these payments to reduce the outstanding loan balance. Once all the outstanding invoices are collected and the loan balance is paid off, the assignment of accounts receivable is considered complete.

This arrangement allows ABC Corp. to obtain the immediate cash it needs to continue its business operations, while XYZ Bank takes on the risk associated with the accounts receivable collection process.

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Assignment of Accounts Receivable

The financial accounting term assignment of accounts receivable refers to the process whereby a company borrows cash from a lender, and uses the receivable as collateral on the loan. When accounts receivable is assigned, the terms of the agreement should be noted in the company's financial statements.

Explanation

In the normal course of business, customers are constantly making purchases on credit and remitting payments. Transferring receivables to another party allows companies to reduce the sales to cash revenue cycle time. Also known as pledging, assignment of accounts receivable is one of two ways companies dispose of receivables, the other being factoring.

The assignment process involves an agreement with a lending institution, and the creation of a promissory note that pledges a portion of the company's accounts receivable as collateral on the loan. If the company does not fulfill its obligation under the agreement, the lender has a right to collect the receivables. There are two ways this can be accomplished:

General Assignment : a portion of, or all, receivables owned by the company are pledged as collateral. The only transaction recorded by the company is a credit to cash and a debit to notes payable. If material, the terms of the agreement should also appear in the notes to the company's financial statements.

Specific Assignment : the lender and borrower enter into an agreement that identifies specific accounts to be used as collateral. The two parties will also outline who will attempt to collect the receivable, and whether or not the debtor will be notified.

In the case of specific assignment, if the company and lender agree the lending institution will collect the receivables, the debtor will be instructed to remit payment directly to the lender.

The journal entries for general assignments are fairly straightforward. In the example below, Company A records the receipt of a $100,000 loan collateralized using accounts receivable, and the creation of notes payable for $100,000.

In specific assignments, the entries are more complex since the receivable includes accounts that are explicitly identified. In this case, Company A has pledged $200,000 of accounts in exchange for a loan of $100,000.

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The Difference Between Assignment of Receivables & Factoring of Receivables

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• What Do Liquidity Ratios Measure?
• What Are Some Examples of Installment & Revolving Accounts?

You can raise cash fast by assigning your business accounts receivables or factoring your receivables. Assigning and factoring accounts receivables are popular because they provide off-balance sheet financing. The transaction normally does not appear in your financial statements and your customers may never know their accounts were assigned or factored. However, the differences between assigning and factoring receivables can impact your future cash flows and profits.

How Receivables Assignment Works

Assigning your accounts receivables means that you use them as collateral for a secured loan. The financial institution, such as a bank or loan company, analyzes the accounts receivable aging report. For each invoice that qualifies, you will likely receive 70 to 90 percent of the outstanding balance in cash, according to All Business . Depending on the lender, you may have to assign all your receivables or specific receivables to secure the loan. Once you have repaid the loan, you can use the accounts as collateral for a new loan.

Assignment Strengths and Weaknesses

Using your receivables as collateral lets you retain ownership of the accounts as long as you make your payments on time, says Accounting Coach. Since the lender deals directly with you, your customers never know that you have borrowed against their outstanding accounts. However, lenders charge high fees and interest on an assignment of accounts receivable loan. A loan made with recourse means that you still are responsible for repaying the loan if your customer defaults on their payments. You will lose ownership of your accounts if you do not repay the loan per the agreement terms.

How Factoring Receivables Works

When you factor your accounts receivable, you sell them to a financial institution or a company that specializes in purchasing accounts receivables. The factor analyzes your accounts receivable aging report to see which accounts meet their purchase criteria. Some factors will not purchase receivables that are delinquent 45 days or longer. Factors pay anywhere from 65 percent to 90 percent of an invoice’s value. Once you factor an account, the factor takes ownership of the invoices.

Factoring Strengths and Weaknesses

Factoring your accounts receivables gives you instant cash and puts the burden of collecting payment from slow or non-paying customers on the factor. If you sell the accounts without recourse, the factor cannot look to you for payment should your former customers default on the payments. On the other hand, factoring your receivables could result in your losing customers if they assume you sold their accounts because of financial problems. In addition, factoring receivables is expensive. Factors charge high fees and may retain recourse rights while paying you a fraction of your receivables' full value.

• All Business: The Difference Between Factoring and Accounts Receivable Financing

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Assignment of Accounts Receivable – Trap for the Unwary

By  Steven A. Jacobson

Most businesses are familiar with the mechanics of an assignment of accounts receivable. A party seeking capital assigns its accounts receivable to a financing or factoring company that advances that party a stipulated percentage of the face amount of the receivables.

The factoring company, in turn, sends a notice of assignment of accounts receivable to the party obligated to pay the factoring company’s assignee, i.e. the account debtor. While fairly straightforward, this three-party arrangement has one potential trap for account debtors.

Most account debtors know that once they receive a notice of assignment of accounts receivable, they are obligated to commence payments to the factoring company. Continued payments to the assignee do not relieve the account debtor from its obligation to pay the factoring company.

It is not uncommon for a notice of assignment of accounts receivable to contain seemingly innocuous and boilerplate language along the following lines:

Please make the proper notations on your ledger and acknowledge this letter and that invoices are not subject to any claims or defenses you may have against the assignee.

Typically, the notice of assignment of accounts receivable is directed to an accounting department and is signed, acknowledged and returned to the factoring company without consideration of the waiver of defenses languages.

Even though a party may have a valid defense to payment to its assignee, it still must pay the face amount of the receivable to the factoring company if it has signed a waiver. In many cases, this will result in a party paying twice – once to the factoring company and once to have, for example, shoddy workmanship repaired or defective goods replaced. Despite the harsh result caused by an oftentimes inadvertent waiver agreement, the Uniform Commercial Code validates these provisions with limited exceptions. Accordingly, some procedures should be put in place to require a review of any notice of assignment of accounts receivable to make sure that an account debtor preserves its rights and defenses.

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How Do You Write an Assignment in Accounting? Expert Tips

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What Is the Purpose of Accounting?

What are the different types of accounting, 8 tips to write an assignment in accounting, need accounting assignment help hire us.

Assignments in accounting can sometimes be hard to write. On account of this, the blog will provide guidance and tips on writing an accounting assignment. But before moving there, we will briefly refresh our knowledge about what's accounting.

Accounting is a process that records the financial transactions of a business and will summarise, analyse, and report them for oversight. These transactions are called the financial statements. It helps a company collect and overview a concise summary of its cash flow, debits, credits, and position over a period of time.

You will have to do various accounting assignments after you choose the degree, which can sometimes be challenging to manage. So, to ensure the quality of work and achieve good grades, you can seek college assignment help to guide you.

So, let us now understand the purpose of using accounts in businesses and companies.

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Accounting plays a very significant role in the functioning of any business or industry. In most places, there are dedicated financial departments that work for it. They will generate reports to help the company make informed future decisions and work on its weaknesses. These reports will give you a basic idea of the operations of the business and its cash flows over a longer time frame. Therefore, it's playing a vital role in helping the industry know its position and what steps to take, keep, or withdraw according to its financial status.

Mentioning it all clearly and concisely can sometimes be hard for the students. Therefore, you can seek accounting assignment help to get the required support for doing it accurately.

Accounting is split into various groups that record specific transactions and information. There are several of them, some of the important ones are given below. It will help you do the assignment properly by categorising and understanding them better.

Financial Accounting

Financial accounting is the process that generates the annual financial statements audited by external firms. Its result of all the transactions performed during that year in the form of balance sheets, income statements, and cash flow statements. Most companies have an annual audit by some external firms for one reason or another.

So, if you have an assignment on this topic, feel free to seek guidance from finance assignment help available online.

Managerial Accounting

Managerial accounting is quite similar to financial accounting but organises the data differently. It's provided to assist with decision-making about how the business operates, on a monthly or quarterly basis. It will also include other factors such as budgeting, forecasting, and analysis of the company's transaction statements.

Cost Accounting

Cost accounting will help the business make decisions related to costs, such as management and production costs. It will help the company know the product cost and measure its overall economic performance.

So, if you have an assignment on this type of accounting, then cost accounting assignment help is available.

Tax Accounting

Tax accounting will note whether the company is following federal and government rules and help it take strategic measures to minimise its liability. The tax accountant will see the complete tax process of a company and ensure all the essential returns are filed on time.

Thus, these were some types of accounting that are commonly used in a business. Now, you will read about the major tips to guide you in writing a perfect assignment.

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Every student wants to know the secret behind a perfect accounting assignment with accuracy and detail. But honestly, it's not a secret at all. That's just the magic of some ways and things that make your assignment worth a perfect grade.

Worry not! We have compiled a list of tips that will guide you to do the same. Therefore, read below to learn about those details and get the assignment help you want for completing the work.

Know the Basics of Accounting

It is the most essential thing for performing any task with perfection. You should have a grip on the topic you want to work on with frequent insights about its principle ideas. It includes knowledge about its journals, ledger accounts, consignments and others.

Comprehend the Requirements

Have a clear understanding of what the assignment's requirements are for you. Clarify the basic standards to write with all the other necessities and details you need to include. Also, remember the funding aspect of the assignment you work on.

Form a Theory & Outline

It is easier to produce a better assignment when you have a good idea about its structure and flow. You can divert how a document will be when you know exactly how you want it to look and emphasise. Therefore, create a proper outline to present information and facts effectively in your work.

Furthermore, have an idea about its essential elements and theories with their implementation to support your assignment outline.

Practice and Discussions

You should do proper research to create a mind-blowing assignment. So, when you are working on an accounts assignment then it might not look as easy. You will need a lot of practice with various levels of research while working on the paper.

Also, it is essential to include all the points logically. Your facts should be systematic and with reasoning to support your topic. Therefore, practice is necessary for writing a good discussion in your assignment.

Give a Proper Introduction

The introduction of your assignment should receive significant attention and time. It will play a crucial part in hooking up your readers and presenting the assignment problem to them in a concise way. It will also help to showcase your content to bind their interest in knowing more about it.

Convincing Thesis Statement

It will attract your reader's attention and help you summarize the motto of your assignment. Accounting as a subject needs a solid thesis statement with a clear purpose and point of writing. Your arguments in the body of your content will also support this and try to find the solutions.

Editing & Proofreading

Proofread your work multiple times after completing and editing as per the requirements. Check if there is any spelling, grammatical, punctuation and readability error. Edit the document for any reading barrier and all the mistakes that might have missed your eyes the first time. A flawless assignment will raise your level bar in the eyes of your professor or reader.

To Conclude

A proper ending is a must in any assignment. Here, mention the characteristics of your whole document with the correct citations and references. Avoid including any new information here and conclude the extensive arguments and points. But if you still face any issues, seek help from academic writing services to support you in finishing the work.

If you still wonder - how to do your assignment in accounting, you are in the right place. We at the Assignment Desk have experienced experts who are always ready to help you. You should submit a flawless and error-free assignment for a better grade. Therefore, feel free to contact us for anything and get the required help to make your document perfect.

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• Options and Derivatives
• Strategy & Education

Assignment: Definition in Finance, How It Works, and Examples

Adam Hayes, Ph.D., CFA, is a financial writer with 15+ years Wall Street experience as a derivatives trader. Besides his extensive derivative trading expertise, Adam is an expert in economics and behavioral finance. Adam received his master's in economics from The New School for Social Research and his Ph.D. from the University of Wisconsin-Madison in sociology. He is a CFA charterholder as well as holding FINRA Series 7, 55 & 63 licenses. He currently researches and teaches economic sociology and the social studies of finance at the Hebrew University in Jerusalem.

Yarilet Perez is an experienced multimedia journalist and fact-checker with a Master of Science in Journalism. She has worked in multiple cities covering breaking news, politics, education, and more. Her expertise is in personal finance and investing, and real estate.

What Is an Assignment?

Assignment most often refers to one of two definitions in the financial world:

• The transfer of an individual's rights or property to another person or business. This concept exists in a variety of business transactions and is often spelled out contractually.
• In trading, assignment occurs when an option contract is exercised. The owner of the contract exercises the contract and assigns the option writer to an obligation to complete the requirements of the contract.

Key Takeaways

• Assignment is a transfer of rights or property from one party to another.
• Options assignments occur when option buyers exercise their rights to a position in a security.
• Other examples of assignments can be found in wages, mortgages, and leases.

Uses For Assignments

Assignment refers to the transfer of some or all property rights and obligations associated with an asset, property, contract, or other asset of value. to another entity through a written agreement.

Assignment rights happen every day in many different situations. A payee, like a utility or a merchant, assigns the right to collect payment from a written check to a bank. A merchant can assign the funds from a line of credit to a manufacturing third party that makes a product that the merchant will eventually sell. A trademark owner can transfer, sell, or give another person interest in the trademark or logo. A homeowner who sells their house assigns the deed to the new buyer.

To be effective, an assignment must involve parties with legal capacity, consideration, consent, and legality of the object.

A wage assignment is a forced payment of an obligation by automatic withholding from an employee’s pay. Courts issue wage assignments for people late with child or spousal support, taxes, loans, or other obligations. Money is automatically subtracted from a worker's paycheck without consent if they have a history of nonpayment. For example, a person delinquent on $100 monthly loan payments has a wage assignment deducting the money from their paycheck and sent to the lender. Wage assignments are helpful in paying back long-term debts.

Another instance can be found in a mortgage assignment. This is where a mortgage deed gives a lender interest in a mortgaged property in return for payments received. Lenders often sell mortgages to third parties, such as other lenders. A mortgage assignment document clarifies the assignment of contract and instructs the borrower in making future mortgage payments, and potentially modifies the mortgage terms.

A final example involves a lease assignment. This benefits a relocating tenant wanting to end a lease early or a landlord looking for rent payments to pay creditors. Once the new tenant signs the lease, taking over responsibility for rent payments and other obligations, the previous tenant is released from those responsibilities. In a separate lease assignment, a landlord agrees to pay a creditor through an assignment of rent due under rental property leases. The agreement is used to pay a mortgage lender if the landlord defaults on the loan or files for bankruptcy . Any rental income would then be paid directly to the lender.

Options Assignment

Options can be assigned when a buyer decides to exercise their right to buy (or sell) stock at a particular strike price . The corresponding seller of the option is not determined when a buyer opens an option trade, but only at the time that an option holder decides to exercise their right to buy stock. So an option seller with open positions is matched with the exercising buyer via automated lottery. The randomly selected seller is then assigned to fulfill the buyer's rights. This is known as an option assignment.

Once assigned, the writer (seller) of the option will have the obligation to sell (if a call option ) or buy (if a put option ) the designated number of shares of stock at the agreed-upon price (the strike price). For instance, if the writer sold calls they would be obligated to sell the stock, and the process is often referred to as having the stock called away . For puts, the buyer of the option sells stock (puts stock shares) to the writer in the form of a short-sold position.

Suppose a trader owns 100 call options on company ABC's stock with a strike price of $10 per share. The stock is now trading at $30 and ABC is due to pay a dividend shortly. As a result, the trader exercises the options early and receives 10,000 shares of ABC paid at $10. At the same time, the other side of the long call (the short call) is assigned the contract and must deliver the shares to the long.

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