Dictionary of Accounting Terms: product financing arrangement
product financing arrangement
agreement to finance the acquisition of a product through debt. Another entity may buy a product on behalf of the purchaser. At the time of acquisition, the purchaser debits inventory and credits a liability for the amount owed to the other entity. When payment of the obligation is made, the liability is debited for the principal, interest expense is debited for the interest, and cash is paid for the total amount.
