Final answer:
When accounts receivable are sold without recourse, the seller retains the risk of uncollectibility.
Step-by-step explanation:
In business, when accounts receivable are sold without recourse, the seller retains the risk of uncollectibility.
This means that if the buyer of the accounts receivable is unable to collect payment from the debtor, the seller is still responsible for the uncollected amount.
The seller essentially acts as a guarantor for the payment.
For example, if a company sells its accounts receivable to a factoring company, and one of the debtors fails to pay, the company that sold the accounts receivable is obligated to pay the factoring company for the uncollected amount.
The seller retains the risk of uncollectibility when accounts receivable are sold without recourse.
When a sale of accounts receivable is structured without recourse, the buyer of the receivables assumes the risk of nonpayment, and the seller is not responsible for any debts that are not collected.
In contrast, a sale with recourse provides that the seller must compensate the buyer for any uncollected receivables, retaining the credit risk associated with the accounts.