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Creditors/Debtors – Treatment in Accounts

What are debtors and creditors in accounting?
While accounting for any transaction, debtors and creditors are the two terms used for journal entries for interpreting the transaction in the books of accounts. People who are assets for a corporation are referred to as debtors since they either owe the company money or need to repay it in the future.
What are the characteristics of a creditor?
1. Debtors avail credit facilities as they borrow. 1. Creditors extend credit as they act as lenders. 2. It is a current asset for the business. 2. It is a current liability for the business. 3. Debtors are a result of credit sales by the business. 3. Creditors are a result of credit purchases by the business. 4. Discount is allowed on debtors. 4.
Can a business be a debtor and a creditor at the same time?
Note that every business entity can be both debtor and creditor at the same time. For example, a company may borrow funds to expand its operations (i.e., be a debtor) while it may also sell its goods to the customers on credit (i.e., be a creditor).
How does a company manage a debtor?
A company must carefully manage its debtors and creditors to monitor the lag between incoming and outgoing payments. The practice ensures that a company receives payments from its debtors and sends payments to its creditors on time. Thus, the company’s liquidity does not deteriorate while the default probability does not increase. What is a Debtor?

What are debtors and creditors in accounting?