Londonrocks

To be honest, I've had a little trouble understanding this concept as well but I'll try to give an answer. Anyone with a better explanation please share!

A sale of A/R while still maintaining the credit risk (sale with recourse) is essentially collateralized borrowing. The current ration adjustment should then be as follows: increase A/R to the amount it was before the sale, and increase your current liabilities since you still responsible for any default.

If it were to be a sale without recourse then the accounting process would be a decrease in A/R and an increase in cash.