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Old 08-27-2015, 06:35 AM
asjin1212 asjin1212 is offline
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Default Debtors and Creditors

A debtor is an entity that owes a debt to another entity. The entity may be an individual, a firm, a government, a company or other legal person. The counterparty is called a creditor. When the counterpart of this debt arrangement is a bank, the debtor is more often referred to as a borrower.


Debtors and creditors are terms commonly used in accounting, finance and bankruptcy. In accounting, debtors and creditors are the names given to two sets of stakeholders that have very different relationships with a business. These names were derived from Latin terms because the accounting system that we operate today had its origins in Venice Italy some 500 years ago, when Latin was all the rage.
Debtors are stakeholders who owe money to the business. Debtors are typically customers who have taken possession of goods or services from a business but have not yet paid the business for those goods and services. The English word debtor is derived from the Latin word 'debere' meaning 'to owe'. So in accounting, customers who owe money to the business are called debtors.
Creditors are stakeholders who are owed money by the business. Creditors are typically suppliers that have delivered goods or services to the business but the business has not yet paid the supplier for those goods and services. In effect, the supplier has loaned money to the business. The English word creditor is derived from the Latin word 'crēditum' meaning 'to loan'. So in accounting, suppliers who loan money to the business are called creditors.
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