Debtors are those to whom goods and services are sold against credit.
Creditors are those from whom good and services are purchased against credit.
Creditor - They are persons/entities who have delivered a product or service to the business for which an amount is due to them and needs to be paid in the future
Debtor - They are persons/entities who have purchased/taken a product or service from the business for which an amount is due from them and needs to be collected in the future
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In simple words creditors are suppliers and debtors are customers.
When goods are purchased on credit, a creditor comes into existence .Since money is payable to the supplier/creditor it is shown as liability in the balance sheet.
On the other hand when goods are sold on credit, a debtor comes into existence. Since Money is receivable from the debtor/customer it is shown as an asset in the balance sheet.
Creditors are entities which can be individual or any institution who give credit to the company or a person for doing business. This credit is in form of money e.g. loan or intentory e.g. raw material, finished goods etc. and this credit needs to be repaid in certain defined time with or without interest depending upon the clauses of agreement.
Debtors are entities which can be individual or any institution to whom the company sells its goods upon credit. The debtors need to pay for their purchases in future defined time, if it is delayed then interest is payable depending upon the terms of agreement.
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Get 5 credit points for each correct answer. The best one gets 25 in all.
