Distinguish between debtors and creditors
Debtors: A debtor is a person or enterprise that owes money to another party. Debtors are the party who owes debt towards the company.
- Meaning: Persons or organizations that are liable to pay money to a firm are called debtors.
- Nature: Debtors are Current assets. They have a debit balance to the firm.
- Payment: Payments are received from them.
- Shown: They are shown as assets in the Balance sheet under Current Assets.
Creditors: A creditor is a person, bank, or other enterprise that has lent money or extended credit to another party. Creditors are the parties to whom the company owes a debt.
- Meaning: Persons or organizations to whom the firm is liable to pay money are called creditors.
- Nature: Creditors are Current liabilities. They have the credit balance to the firm.
- Payment: Payments are made to them.
- Shown: They are shown as liabilities in the Balance Sheet under Current Liabilities.
